Question
Suppose the quantity demanded of Good Z ( ) depends upon its price (), monthly income (Y), and the price of a related Good W
Suppose the quantity demanded of Good Z ( ) depends upon its price (), monthly income (Y), and the price of a related Good W (). The demand for Good Z () is expressed by the equation= = 150 8 + 2 15. The monthly income (Y) is equal to $78 and the price related to Good W () is equal to $4. On the other hand, the supply for Good Z ( ) is expressed as = 20 + 2.In general, the condition for equilibrium in a market is that the quantity supplied is equal to the quantity demanded. This equilibrium identity determines the market price P, since quantity supplied and quantity demanded are both functions of price. However, most states impose sales tax on some goods and services as a means of generating revenue. In this event, sales taxes also influence consumer behavior. Now, for instance, suppliers must pay a tax of $6 per unit of Good Z. Determine the following requirements:
a. How much should the consumers pay for any Good Z considering tax in dollars? (5pts)
b. Due to tax, the quantity diminished by how much in units? (5pts)
c. How much is the tax revenue for Good Z in dollars? (5pts)
d. What is the equilibrium price without tax in dollars? (10pts)
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