Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please provide clear explanation thanks 1. (14 marks) Suppose the market for laser pointers consists of 2 types of people: profes- sors and cat lovers.

please provide clear explanation thanks

image text in transcribed
1. (14 marks) Suppose the market for laser pointers consists of 2 types of people: profes- sors and cat lovers. The professors have an individual demand of qprof = 13 - = P and 1 CT the cat lovers have an individual demand of qcat = 20 - - P. (a) (4 marks) If there are 30 consumers with a demand of qprof and 8 consumers with a demand of qCat, then what is the (inverse) market demand curve P(QD) (for all 38 people)? Illustrate it in a graph. (b) (4 marks) Suppose the (inverse) market supply curve is P = 1 15 Q, what is the market equilibrium outcome? (Hint: Both groups buy laser pointers and your quantity should be somewhere between 250 and 400.) What is the consumer and producer surplus in this case? (Reminder: Your consumer surplus will be ugly to calculate since the demand curve is discontinuous). (c) (6 marks) The government has become concerned about long term environmental harm from improper disposal of the laser pointers. To alleviate some of the burden, the government decides to impose a $7.50 excise tax on each laser pointer sold. What is the new equilibrium? How much has the government raised in tax revenue? How big is the dead weight loss? What is the tax incidence for the consumers

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Research Methods Design And Analysis

Authors: Larry Christensen

13th Edition

0205961258, 978-0205961252

More Books

Students also viewed these Economics questions

Question

3. How can we use information and communication to generate trust?

Answered: 1 week ago