The demand function for Product X is Qd = 100 - 2P and its supply function is
Fantastic news! We've Found the answer you've been seeking!
Question:
- The demand function for Product X is Qd = 100 - 2P and its supply function is Qs = -20 + P where P is the price of Product X in dollars while Qd is the quantity demanded and Qs is the quantity supplied (both expressed in thousands of units).
Part 1
- What are the equilibrium price and quantity? (3 points)
- What is the consumer surplus in the market for Product X? (2 points)
- What is the producer surplus in the market for Product X? (2 points)
- What is the total surplus in the market for Product X? (1 point)
Part 2
Assume that the government decide to impose a tax of $6 on the price of each Product X that consumers purchase.
- What are the new equilibrium price and quantity? (2 points)
- What is the new consumer surplus in the market for Product X? (2 points)
- What is the new producer surplus in the market for Product X? (2 points)
- What is the new total surplus in the market for Product X? (1 point)
- Is the new market equilibrium efficient? Why? Why not? (5 points)
Posted Date: