Question

The demand and supply for orange juice are given by Qd = 30−P and Qs = 4P. (a) Solve for the equilibrium price and quantity. (b) Suppose now the government imposes a per-unit tax of $2.5 on the sellers. (c) Solve for the new quantity, net price sellers received, and price consumers paid. (d) Calculate the government revenue from the taxation. I only need these answered: (e) Calculate the deadweight loss resulting from the taxation. (f) What portion of the deadweight loss used to belong to each party. (g) What fraction of the economic incidence of the tax is borne by consumers? (h) Solve parts (b)(e) for the case where the consumers pay the tax instead of the sellers. Please answer only E,F,G,H

Answer 1

Tax creates dead-weight loss which is some portion of consumer surplus and some of producer surplus.

Tax borne by consumer = Price paid by consumer after tax - Initial equilibrium price

Tax borne by producer = Equilibrium price - price received by seller after tax