Question
Please solve this problem hurry i want to answer of this question I'll give you like if you done it Suppose that a market is
Please solve this problem hurry i want to answer of this question I'll give you like if you done it
Suppose that a market is described by the following supply and demand equations:
Qs = 2P
Qd = 300 - P . Solve for the equilibrium price and the equilibrium quantity.
Suppose that a tax of T is placed on buyers, so the new demand equation is:
Qd = 300 - ( P + T)
Solve for the new equilibrium. What happens to the price received by sellers, the price paid by buyers, and the quantity sold?
(A) Tax revenue is T Q. Use your answer from part (b) to solve for tax revenue as a function of T. Graph this relationship for T between 0 and 300.
(B) The deadweight loss of a tax is the area of the triangle between the supply and demand curves. Recalling that the area of a triangle is base height, solve for deadweight loss as a function of T. Graph this relationship for T between 0 and 300. (Hint: If you look sideways, the base of the deadweight loss triangle is T, and the height is the difference between the quantity sold with the tax and the quantity sold without the tax.)
(C) The government now levies a tax of $200 per unit on this good. Is this a good policy? Why or why not? Can you propose a better policy?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started