Question

In: Economics

The market for a product has the following inverse demand and supply functions Pd = 170...

The market for a product has the following inverse demand and supply functions

Pd = 170 - Qd

Ps    = 20 + 0.5Qs

  1. Find the competitive equilibrium and show on a diagram.
  2. Find the consumer surplus and producer surplus.
  3. Suppose the government gives a per-unit subsidy of $15 to sellers on each unit sold. Find the new equilibrium (quantity traded, consumer and seller prices). Show on your diagram.
  4. What is the incidence of the subsidy on consumers and what on suppliers? How can you explain the incidence of the subsidy on consumers and sellers?
  5. How much does the government spend on the subsidy? Who gets what?
  6. Find the new consumer and producer surplus. Is there a deadweight loss? If so find it.

Solutions

Expert Solution

Rahul Sunny answered 7 months ago
Next > < Previous

Related Solutions

The market for a product has the following inverse demand and supply functions Pd= 120 -...
The market for a product has the following inverse demand and supply functions Pd= 120 - Qd Ps   = 0.5Qs. Suppose the state government levies a tax of $15 on each unit sold, imposed on the consumers. Find the prices that consumers pay (Pd) and the producers receive (Ps) and the new quantity traded in the market, Q**. Show on your diagram. What is the incidence of the tax on consumers and what on producers. How much money does the state...
The market for a product has the following inverse demand and supply functions Pd = 120...
The market for a product has the following inverse demand and supply functions Pd = 120 - Qd Ps      = 0.5Qs. 1. Find the equilibrium price P* and quantity Q*. Show on a diagram 2. Find the consumer and producer surplus
Use the following market supply and demand functions to answer questions PD = 5000 − 25QD...
Use the following market supply and demand functions to answer questions PD = 5000 − 25QD PS = 15QS Solve for the equilibrium price and quantity. What is the consumer surplus and producer surplus generated by this market? If there were an added fixed cost of production equal to 1000, what is the new equilibrium price and quantity? 1 How do the producer and consumer surpluses change, respectively, as a consequence of the additional fixed cost given in question 11?...
An industry's inverse demand was PD = 20 - 0.1Q and its inverse supply was PS...
An industry's inverse demand was PD = 20 - 0.1Q and its inverse supply was PS = 4 + 0.1Q. a. Calculate the consumer surplus, producer surplus, government revenue and deadweight loss for taxes of $4, $8, $12 and $16 per unit sold. b. Graph government revenue and deadweight loss as functions of these tax rates. c. What tax maximizes government revenue?
The inverse market demand curve is P = 170 – 4Q. Two firms in this market...
The inverse market demand curve is P = 170 – 4Q. Two firms in this market are evenly splitting the output. Each firm produces the product at a constant marginal cost of $10. Which of the following statements is TRUE? I. If one firm produces 2 more units of output, its profits will rise to $864. II. If neither firm cheats, each firm will earn a profit of $800. III. If one firm produces 3 more units of output, the...
3- In a perfectly competitive market the demand and supply functions for a product is given...
3- In a perfectly competitive market the demand and supply functions for a product is given by ?? = 200 − 4? ?? = −100 + 6? Now suppose that the government taxes the good by a unit tax of 5TL. a) Find the price that demanders pay and the price that suppliers receive when buyers are responsible to pay for the tax. Find the total tax collection and the deadweight loss from this taxation policy. Show your analysis explicitly...
Suppose the inverse demand and inverse supply functions for a good are given as P= 200-0.5Q...
Suppose the inverse demand and inverse supply functions for a good are given as P= 200-0.5Q and    P= 20 + 0.5 Q.    Calculate the initial equilibrium price and quantity. Draw the above inverse demand and inverse supply functions. Suppose a per unit tax of $10.00 was levied on sellers. Determine graphically and algebraically the effect of the tax on the price paid by demanders, the price received by sellers, the total tax paid, and the fraction of the tax paid...
Per-unit Tax: The Isoland widget market has the following supply and demand functions: Supply: P =...
Per-unit Tax: The Isoland widget market has the following supply and demand functions: Supply: P = 20 + 2QS Demand: P = 160 − 2QD Suppose a per-unit tax of $40 is imposed on this market. Draw a picture and calculate: (a) Price consumers pay (b) price producers receive (c) Total tax revenue (d) Consumer surplus (e) Producer Surplus (f) Consumer tax burden (g) Producer tax burden (h) Total welfare (i) Deadweight loss
Per-unit Tax: The Isoland widget market has the following supply and demand functions: Supply: P =...
Per-unit Tax: The Isoland widget market has the following supply and demand functions: Supply: P = 20 + 2QS Demand: P = 160 − 2QD Suppose a per-unit tax of $40 is imposed on this market. Draw a picture and calculate: (a) Price consumers pay (b) price producers receive (c) Total tax revenue (d) Consumer surplus (e) Producer Surplus (f) Consumer tax burden (g) Producer tax burden (h) Total welfare (i) Deadweight loss
Part A Product X has the following demand and supply functions: Qd = 30 – 2p...
Part A Product X has the following demand and supply functions: Qd = 30 – 2p Qs = -10 + 6p The government does not currently place indirect taxes on Product X. The production and consumption of Product X, however, is considered to be undesirable. The government subsequently places an indirect tax on the product which creates a producers price of $4. Product X also has a coefficient of income elasticity of +2 Use the above information to : Draw...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT