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6) In October, there is a spike in demand for pumpkins. With the end of Halloween, the market for pumpkins goes back to normal and
6) In October, there is a spike in demand for pumpkins. With the end of Halloween, the market for pumpkins goes back to normal and is described by the following supply and demand equations: QS= 3p QD=400 -p where Q is the number of bushels of pumpkins, and the P is the price of a bushel. a) Solve for the equilibrium price and quantity of pumpkins. b) Suppose that a tax of T is placed on buyers, so the new demand equation is QD = 400 - (p + T). Solve for the new equilibrium price and quantity. What happens to the price received by sellers, the price paid by buyers, and the quantity sold? c) Using your answer to part (b), solve for the amount of tax revenue as a mction of T. Graph this relationship for T between 0 and 400. d) Solve for deadweight loss as a function of T. Graph this relationship for T between 0 and 400. e) The government levies a tax of $200 per bushel because it wants more money. Is this a good policy? Why or why not? Can you propose a better policy
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