The demand and supply equations for a product are given by QD = 20-P QS = -10 +2P

The demand and supply equations for a product are given by

Q^D = 20-P

Q^S = -10 +2P

1. Calculate the equilibrium price and quantity.

2. Calculate the price elasticity of demand and the price elasticity of supply at the above equilibrium point.

3. An excise tax of $1 per unit is imposed on the producers of the product. Calculate the new equilibrium price and quantity. Calculate the consumer and producer tax burden ( as a percentage of the tax).

4. Calculate the change in consumer and producer surplus due to the tax. Calculate the amount of the deadweight loss.

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

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