Question
The demand for bags of candy is given by P = 480.2Q, and the supply by P = Q. The demand intercepts here are P
The demand for bags of candy is given by P = 48−0.2Q, and the supply by P = Q. The demand intercepts here are P = $48 and Q = 240; the supply curve is a 45-degree straight line through the origin.
a) Illustrate the resulting market equilibrium in a diagram knowing that the demand intercepts are {$48, 240}, and that the supply curve is a 45-degree line through the origin.
b) If the government now puts a $12 tax on all such candy bags, illustrate on a diagram how the supply curve will change.
c) Instead of the specific tax imposed in part (b), a percentage tax (ad valorem) equal to 30
d) Percent is imposed. Illustrate how the supply curve would change.n
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