Solve the question

1. Consider the following demand and supply equations:

Q_d = 360 - 15P

Q_s = -15 + 10P

Find the equilibrium price and quantity. Suppose the government imposes a tax of Tk. 2 per unit of the product sold. Calculate the new equilibrium price and quantity? How is the tax shared by the producer and the consumer? (2+2+2=6 marks)

(b)The price of a product rises from 48 to 56. As a result, the quantity demanded falls from 32 to 24. Calculate price elasticity using the average elasticity formula. Will you recommend the producer to increase the price in order to increase total revenue?(2+2=4 marks)

2. (a)Define income elasticity. How can you determine the nature of a product on the basis of

income elasticity?(3 marks)

(b)Distinguish between a normal good and an inferior good?(2 marks)

(c)Explain the relationship between price elasticity and total expenditure.(5 marks)