Question

In: Economics

Market supply is given as Qd=200-pMarket demand is given as Os = 4P a . a...

Market supply is given as Qd=200-pMarket demand is given as Os = 4P a . a Calculate equilibrium price and quantity
If an excise tax of $ 4 per unit is imposed on sellers , calculate the price consumers pay Pc and the price sellers receive Ps .
C. Also , calculate the dead weight loss and consumer surplus after the tax .

Solutions

Expert Solution

a) Equilibrium occurs when demand = supply

200 - P = 4P

5P = 200

P = 40

At this P = 40, Q = 160

b) At a tax of $4 on sellers, tax will be shared among both consumers as well as sellers which will fall in the ratio of (demand curve touching price axis - equilibrium price) to (equilibrium price - supply curve touching price axis) which is [(100 - 40) / (40 - 0]) = 1.5

Burden on consumers would be [1.5 / (1.5 + 1)] of total tax which is 60% totalling of 0.6 * 4 = $2.4 while burden on producer is [1 / (1 + 1.5)] which is 40% totaling of 0.4 * 4 = 1.6

Price seller receive falls to $38.4 while price buyer pay rises to $42.4

c) Producer surplus post tax is area of portion D whose sum is (1/2) (153.6 - 0) (38.4 - 0) = 2,949.12

Deadweight loss is area of portion E + F whose sum is area of portion (1/2) (160 - 153.6) (42.4 - 38.4) = 12.8


Related Solutions

Suppose the market demand is QD = 200−P and market supply is QS = 4P−100. A....
Suppose the market demand is QD = 200−P and market supply is QS = 4P−100. A. Suppose the government imposes a tax of t = 5 on producers. What is the incidence of the tax on consumers? Producers? B. What is the deadweight loss of the tax?
Consider the market for wheat where demand is given​ by: Qd=120-4p and supply is given​ by:...
Consider the market for wheat where demand is given​ by: Qd=120-4p and supply is given​ by: Qs=50 + 2p. Now suppose​ that, due to a market failure​ (an artificial shipping​ constraint), a maximum of 63.32 units of wheat can be supplied by firms in the market. ​The amount of the deadweight loss caused by the market failure is ​$__________________.
In the market for used cars, the demand and supply equations are given by QD=12,000 -.4P...
In the market for used cars, the demand and supply equations are given by QD=12,000 -.4P and QS=.1P+5000, where P is the price per car and Q measures the quantity of cars. What is the size of the deadweight loss at a price floor of $15,000?
Market demand is given as Qd = 200 – P. Market supply is given as Qs...
Market demand is given as Qd = 200 – P. Market supply is given as Qs = 4P. a. Calculate equilibrium price and quantity a. If an excise tax of $4 per unit is imposed on sellers, calculate the price consumers pay Pc and the price sellers receive Ps. c. Also, calculate the dead weight loss and consumer surplus after the tax.
Market demand is given as Qd = 200 – 3P. Market supply is given as Qs...
Market demand is given as Qd = 200 – 3P. Market supply is given as Qs = 2P + 100. In a perfectly competitive equilibrium, what will be price and quantity? Price will be $20 and quantity will be 140. Price will be $50 and quantity will be 260. Price will be $100 and quantity will be 300. Price will be $140 and quantity will be 380.
Supply and Demand for an imported good are given by QD = 30 – 4P and...
Supply and Demand for an imported good are given by QD = 30 – 4P and QS = 6 + 2P. Currently Canada allows free trade at a world price of $2. a. Trade disputes lead the Canadian government to implement an import quota at Q = 6 units for this good. Provide a labelled diagram and calculate how introducing an import quota will affect consumer, producer and licensee surplus in the economy. Label the deadweight (efficiency) loss. b. Clearly...
Use the following market demand and supply equations to answer questions a and b: 1.Qd=200-4P and...
Use the following market demand and supply equations to answer questions a and b: 1.Qd=200-4P and Qs=P+100 2.TC=0.05*(Q-100)^2 a.)Assume this market is a competitive market calculate the market's profit maximizing price, quantity, and profit. What will happen to profit in the long-run? b.)Assume this market is a monopolistically competitive market calculate the market's profit maximizing price, quantity, and profit. What will happen to profit in the long-run?
Consider a perfectly competitive market with demand and supply Qd = 3360 – 4P and Qs...
Consider a perfectly competitive market with demand and supply Qd = 3360 – 4P and Qs = -240+6P a . Find the equilibrium price and quantity in the market. b. Now suppose we impose a tax of $20 per unit on the supplier. What is the new supply curve, including the tax? c. What are the new equilibrium price and quantity in the market with the tax? d. How much of the tax incidence falls on the consumers in the...
Demand is given by the equation QD=100-P; supply is given by QS= 4P Suppose the world...
Demand is given by the equation QD=100-P; supply is given by QS= 4P Suppose the world price of each unit is $25. Now assume that this economy is open to world trade. How many units will they import or export? Calculate the consumer surplus, producer surplus and total surplus. Help me solve, A Continue to assume that this economy is open to world trade. Suppose the government enacts a tariff off $2 per pound of cocoa beans. Calculate the consumer...
The demand and supply for a product is given by: Qd: 120-4P and Qs: 2P+60 Suppose...
The demand and supply for a product is given by: Qd: 120-4P and Qs: 2P+60 Suppose the government imposes a price ceiling of P=$8 calculate: 1) consumer surplus after the price ceiling 2) Producer surplus after the price ceiling 3) Deadweight Loss
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT