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Solve for Case 3. Demand: Qd = 50 - 4P and Supply: Qs = 20 + 2P Case 3: From the equilibrium in Case 1,
Solve for Case 3.
Demand: Qd = 50 - 4P and Supply: Qs = 20 + 2P
Case 3: From the equilibrium in Case 1, this company experiences two external shocks: (1) the government imposes a specific tax collected from the company and (2) disposable income of the company's customers decreases. What do you expect the new output and price compared to Case 1? Show your work graphically. (Case 1: Without any market distortions, calculate the equilibrium price and output. Show your work.)
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