Question 2 (4 marks)

Suppose the demand curve for pizza can be represented by equation Qd=20-2P, where Qdis the quantity demanded and P is the price. The supply curve for pizza can be represented by the equation Qs=P-1, where Qsis the quantity supplied.

1. a)What are the equilibrium price and quantity in the pizza market? (2 marks)
2. b)Suppose the government impose a $3 tax per pizza. How much more will consumers now
3. pay for pizza? (Hint: the prices in the demand and supply equations are no longer equal. The price that determines quantity demanded now equals the price that determines quantity supplied plus $3). (2 marks)