In the Australian market for apples, quantity demanded is given by Q = 60 – 2P,...

In the Australian market for apples, quantity demanded is given by Q = 60 – 2P, and quantity supplied is given by Q = 4P, where Q represents millions of apples per year.

Suppose that the government imposes a tax of $6 per apple. After the introduction of the tax, the equilibrium price and quantity will be

Solutions

Expert Solution

Before the tax, 60-2p = 4p

60 = 6p

p = 60/6 = 10

q = 60-2*10 = 40

After the tax, the supply curve will become 4(P-6) = 4P-24

60-2P = 4P-24

60+24 = 6P

84 = 6P

P = 84/6 = 14

Q = 60-2*14 = 32

Rahul Sunny answered 1 year ago

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