Suppose the market demand is QD = 100 2P, and the market inverse supply is P = 20 + .5Q_S.

(a) If the market is perfectly competitive, what is the equilibrium price and quantity?

(b) Suppose that the government decides to impose a tax of $10. What is the new equilibrium price and quantity?

(c) Draw a graph showing the deadweight loss created by the tax. Numerically calculate the deadweight loss created by the tax (using the formula for the area of a triangle).

(d) Do buyers or sellers bear more of the burden of the tax? What does this imply about the elasticity of supply and the elasticity of demand?