1)Taxes (25 Points): The Kingdom of Westeros has a robust tradition of betrayal, and entrepreneurs have responded by selling specialty daggers for the purpose of backstabbing. There is now a competitive market for these daggers on both the demand and supply side. Specifically, Lord Tywin's team of economists has estimated the demand and supply for these daggers to be Qdemand = 200 - 4P and Qsupply = -400 + 2P

Quantities are in daggers per month, and prices are in Silver Stags.

a)Calculate the equilibrium price and quantity of daggers in this market!

Queen Cersei needs revenue to prepare for all sorts of bad things (winter, dragons, White Walkers, etc), and so she decides to levy a unit tax of $9 Silver Stags on the production of these specialty daggers.

b)On a single graph, show both the pre-tax and the post-tax equilibrium quantities and prices. Point out both the tax revenue and dead weight loss created by the tax.

c)Calculate the market equilibrium prices and quantity after the tax was imposed. How much deadweight loss does this tax create?

d)How much of this tax is paid for by the consumer? How much by the producer?

e)How does the tax incidence relate to the price elasticities of supply and demand? Based on your answer in d) are suppliers or consumers more sensitive to a price change?

f)Explain how the slope of the supply and demand curve confirm or contradict your finding in e).