Suppose the quantity demanded of avocados is given by Qd = 104 − 40P + 20pt...

Suppose the quantity demanded of avocados is given by Qd = 104 − 40P + 20pt + 0.01Y , where P is the price of avocados, pt is the price of tomatoes, and Y is the average income. The supplied quantity of avocados is Qs = 58 + 15P − 20pf , where pf is the price of fertilizer. Suppose pt = $0.8, Y = $4, 000, and pf = $0.40. 1

(a) What is the equilibrium price and quantity of avocados? Illustrate the demand and supply functions of avocados on a clearly marked graph.

(b) Suppose the government charges a $1.10 specific tax per avocado, to be paid by consumers. What will be the after-tax market price of avocados (that is, the producer price)? What is the incidence of this tax on consumers? Illustrate the effects of the tax on a graph

(c) What is the welfare effect of this taxation on consumers and producers? How much revenue does the government collect from this tax? What is the welfare effect on the society as a whole?

please show all works and draw a graph

Expert Solution

Rahul Sunny answered 2 years ago

Suppose the quantity demanded of avocados is given by Qd = 104 -40P + 20pt +...

Suppose the quantity demanded of avocados is given by Qd = 104 -40P + 20pt + 0.01Y , where P is the price of avocados, pt is the price of tomatoes, and Y is the average income. The supplied quantity of avocados is Qs = 58 + 15P -20pf , where pf is the price of fertilizer. Suppose pt = $0.8, Y = $4, 000, and pf= $0.40. (a) What are the equilibrium price and quantity of avocados? Illustrate the...

Suppose that the demand for curve is QD = 1000-40P, (where QD is the number of...

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Given the following information QD = 240-5P QS= P Where QD is the quantity demanded, Qs is the quantity supplied and P is the price. Suppose the government decides to impose a tax of $12 per unit on sellers in this market. Determine the Demand and Supply equation after tax.

Given the following information, QD = 240-5P QS= P Where QD is the quantity demanded, Qs...

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