2Q Consider a closed economy. Let the demand curve be P = 80 - Q and...

2Q

Consider a closed economy. Let the demand curve be P = 80 - Q and the supply

curve be P = 20 + 2Q .

a) Calculate the equilibrium price and equilibrium quantity.

b) Suppose the government sets a price ceiling of $55, what is the amount of excess demand or excess supply? (Write down excess demand or excess supply).

c) Suppose the government sets a production quota of 16 units, calculate the equilibrium price and equilibrium quantity.

2. Consider a closed economy. Let the demand curve be P = 80 - Q and the supply

curve be P = 20 + 2Q .

a) Suppose the government imposes an unit tax of $3/unit, calculate Q’, Pc, Ps and the tax

revenue

i) assuming the tax is imposed on the consumers

ii) assuming the tax is imposed on the producers.

Expert Solution

Rahul Sunny answered 10 months ago

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