The demand for good X is given by Qx = 100 - 2Px and its supply is perfectly elastic at Px=14. The demand for Y is given by Qy = 350 - 3Py and its supply is perfectly elastic at Py = 18.

a) What are the equilibrium market quantities in the two markets? What are the elasticities?

b) Suppose the government wants to set taxes on the two goods to minimize overall deadweight loss. Use the inverse elasticity rule to calculate the optimal ratio of taxes for the two markets.

c) Just as you can use pre-tax price and quantity, the tax rate and the elasticity of demand calculate deadweight loss (as you did in question 1 above), you can use pre-tax price and revenue to calculate approximate tax revenue. Suppose the government wants to raise $1000 in the two markets. What are the exact taxes for Y and X needed to achieve this?