These next five problems consider tax incidence. Suppose the market supply and demand for guitars in Happy Valley are given by:

Demand: P = 1000 - 0.25Q

Supply: P = 200 + Q

What is the equilibrium price and quantity of the product?

What is the price elasticity of demand at the equilibrium price?

For the next three questions, assume there is $10 per unit tax levied on the consumers of guitars. What price will buyers pay after the tax is imposed?

What is the quantity of the good that will be sold after the tax is imposed?

What is the deadweight loss created by the tax?