Assume that the supply for a product is given by the function: Qs = 20P and...

Assume that the supply for a product is given by the function: Qs = 20P and the demand by Qd = 1000 - 5P, where P is the value and Q is the quantity of the product, respectively.

(a) Calculate the value and quantity of equilibrium.

(b) If the government decides to impose a tax of € 10, determine which curve will be moved and in which direction: i. if the tax is collected by consumers. ii. if the tax is collected by the producers (ie tax on production).

(c) The government has finally decided to impose a € 10 tax and the tax will be collected by consumers. Identify the new equation of the curve that has shifted, due to the imposition of taxation and calculate the price and the amount of equilibrium, after the imposition of the tax of 10 €.

(d) Determine how much of the € 10 tax will be borne by consumers and how much by producers. Explain your answer.

Expert Solution

Rahul Sunny answered 6 months ago

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