Question
(2 points) Questions 5-6 concern the market for grass seed which can be expressed as: demand curve: QD=100-3p, and supply curve: QS=2p. What is the
(2 points) Questions 5-6 concern the market for grass seed which can be expressed as: demand curve: QD=100-3p, and supply curve: QS=2p. What is the price and quantity at equilibrium? 6. (3 points) Suppose that the government now imposes a specific tax of 5 to be paid by consumers. This means that consumers now pay p + 5 while producers receive p. Calculate these new prices. What fraction of the tax is paid by consumer versus producers? That is, find the tax incidence in which consumers pay X/Z of the tax while sellers pay Y/Z of the tax. (Hint: compare the new prices to the original price that was common to both parties; your job is to find X, Y, and Z.)
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