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Suppose the supply curve for beers can be expressed as = 20 + 2 and the demand curve for beers can be expressed as =
Suppose the supply curve for beers can be expressed as = 20 + 2 and the demand curve for beers can be expressed as = 600 2 where is the price of beers and is the quantity of beers. (Note: Part (c) requires you to plot all your results) (a) Show how to solve for equilibrium quantity and price of beers, total expenditure on beers , and total revenue beer producers receive in equilibrium . (b) Suppose the government considers beers as undesirable product in the society and imposes a tax on the producers at $20 on each unit they produce. Demonstrate how to compute the quantity purchased , the price the consumers pay , the price the producers keep , total expenditure on beers paid by consumers , total revenue beer producers keep , and the tax revenue the government receives . (c) Compute the demand elasticity from part (a) and part (b). Plot all the results in a properly labeled graph. How can you use the graph and the demand elasticity to help you explain the difference in total expenditure on beers between part (a) and part (b). (d) How is the tax burden being distributed between the consumers and the producers? Use the bargaining power argument to explain the difference in tax burden between the consumers and the producers
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