This question walks you through the problem as a consultant for the taxation authority in Neverneverland....

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This question walks you through the problem as a consultant for the taxation authority in Neverneverland. You study the following information for the demand and supply functions for two goods – Beer and Cigarettes: P = 125 – 20 P = 5 + 20 P = 200 – 40 P = 20 + Q Beer Demand: Supply: Cigarette Demand: Supply: Unit of quantity: Thousands of Cans Unit of price: S/Can Unit of quantity: Thousands of Packs Unit of price: S/Pack a) Plot the demand and supply curves in both markets. Denote the area of consumer surpluses and producer surpluses. b) Look graphically at the demand curves for both markets. Which market has the lower price elasticity of demand, i.e., in which market are the consumers less sensitive to price change? c) Find the equilibrium price and quantity in both markets. d) Find the value of consumer surpluses and producer surpluses in both markets. This question walks you through the problem as a consultant for the taxation authority in Neverneverland. You study the following information for the demand and supply functions for two goods – Beer and Cigarettes: P = 125 – 20 P = 5 + 20 P = 200 – 40 P = 20 + Q Beer Demand: Supply: Cigarette Demand: Supply: Unit of quantity: Thousands of Cans Unit of price: S/Can Unit of quantity: Thousands of Packs Unit of price: S/Pack a) Plot the demand and supply curves in both markets. Denote the area of consumer surpluses and producer surpluses. b) Look graphically at the demand curves for both markets. Which market has the lower price elasticity of demand, i.e., in which market are the consumers less sensitive to price change? c) Find the equilibrium price and quantity in both markets. d) Find the value of consumer surpluses and producer surpluses in both markets.

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Qn 1 Plot the demand and supply curves in both markets Denote the area of Producer surpluses and Con... View the full answer