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Exercise 2 Suppose that the demand of a good is described by the inverse demand function p = and the supply is given by
Exercise 2 Suppose that the demand of a good is described by the inverse demand function p = and the supply is given by the inverse supply hmction p = 2 + 2q. I. What is the equilibrium price and quantity ofthe good in this market? 3. Determine the incidence of the tax i.e. who bares what shares of the tax. 10-3q 2. Suppose the government imposes a $1 per unit tax on suppliers. Now what is the equilibrium price and quantity of the good in this market? 4. Calculate the elasticities of demand and supply at the equilibrium allocation in the absence of the tax. How do these elasticities work to determine the incidence of the
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