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Suppose that demand and supply for a product are given by the following equations: =151/4 =10+ D. Now suppose the government imposes a tax of
Suppose that demand and supply for a product are given by the following equations: =151/4 =10+
D. Now suppose the government imposes a tax of $4. Write the four conditions that must hold for the market to clear after the tax is in place.
E.Now find the price paid by buyers, the price paid by sellers, and the quantity sold.
F.Find the deadweight loss associated with the tax.
g. Now find the percentage of the tax borne by buyers using the pass-through fraction formula. Does this fraction make sense, given the prices calculated above?
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