Question

In: Economics

1. (a) The demand and supply equations for a good (X) are given by Qd= 4000...

1. (a) The demand and supply equations for a good (X) are given by Qd= 4000 – 25p and Qs = -2000 + 35P respectively, where P = price.

(i) Draw the demand and supply curves for good X on a graph.

(ii) Find the equilibrium price and quantity.

(iii) The government imposes a specific sales tax of R20 per unit on good X. Show the resulting effect on the graph and find the new equilibrium price and quantity.

(iv) Comment on the tax incidence (on the consumer and producer).

(v) Calculate the Price Elasticity of Demand when price rises from the original equilibrium at (ii) to the new equilibrium at (iii).

(b) Discuss the factors influencing the (i) demand for, and (ii) supply of a good,

Solutions

Expert Solution

Rahul Sunny answered 1 year ago
Next > < Previous

Related Solutions

Consider the following demand and supply equations. Demand is given by qd = a – bP,...
Consider the following demand and supply equations. Demand is given by qd = a – bP, where qd is the quantity demanded and P is the price. a and b are parameters (constants) Similarly, the supply function is given by qs = d + eP, where qs is the quantity supplied and d and e are constants a. Plot the demand and supply functions. Label the intercepts clearly. b. What is the market equilibrium price and quantity?
The demand for good x is given as Qd: Qd = 1000 – 5Px – 0.5I...
The demand for good x is given as Qd: Qd = 1000 – 5Px – 0.5I – 10Py + 2Pz – 3Pc Where, Qd = quantity demanded of good x (in thousand units)             Px = price of good x             I = consumer incomes (in thousand)             Py = price of good y             Pz = price of good z             Pc = price of good c If consumer incomes are 30 (in thousand), price of good y is...
The demand for good x is given as Qd: Qd = 1000 – 5Px – 0.5I...
The demand for good x is given as Qd: Qd = 1000 – 5Px – 0.5I – 10Py + 2Pz – 3Pc Where, Qd = quantity demanded of good x (in thousand units)     Px = price of good x     I = consumer incomes (in thousand)     Py = price of good y     Pz = price of good z     Pc = price of good c If consumer incomes are 30 (in thousand), price of good y is...
In the market for good X, demand is QD = 6,000 – 0.8P and supply is...
In the market for good X, demand is QD = 6,000 – 0.8P and supply is QS = 0.4P – 300. A) What are the equilibrium price and quantity? B) What are consumer and producer surplus at market equilibrium? C) Suppose that an increase in consumer income makes consumers value each unit of good X $500 more. Also, a technological breakthrough in production decrease the marginal cost of each unit of good X by $500. What are the new equilibrium...
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 $2. a. Trade disputes lead the Canadian government to implement an import quota at Q = 6 units for this good. Provide a labelled diagram and calculate how introducing an import quota will affect consumer, producer and licensee surplus in the economy. Label the deadweight (efficiency) loss. b. Clearly...
1. Market demand and supply for a commodity are given by the following equations: Demand: X...
1. Market demand and supply for a commodity are given by the following equations: Demand: X = 30 – (1/3) P Supply: X = -2.5 + (1/2) P where X= quantity (units), and P=price per unit ($) Suppose that the government is planning to impose a tax on this commodity and considering the following two options: Option 1: A unit tax of $15 Option 2: An ad valorem tax of 20% a) Find the tax incidence on buyers and producers,...
Suppose the supply and demand curves for natural gas are given by the following equations: QD...
Suppose the supply and demand curves for natural gas are given by the following equations: QD =34−1.8P QS =18+0.7P, where Q denotes the quantity of natural gas in thousands of cubic feet and P denotes the price of gas per thousand cubic feet. 4a) Find the equilibrium price and quantity of natural gas. Illustrate your answer using a supply and demand diagram. 4b) Now suppose that the government regulated the market for natural gas and set the regulated price of...
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 $15,000?
Market demand and supply for a commodity are given by the following equations: Demand: X =...
Market demand and supply for a commodity are given by the following equations: Demand: X = 30 – (1/3) P Supply: X = -2.5 + (1/2) P where X= quantity (units), and P=price per unit ($) Suppose that the government is planning to impose a tax on this commodity and considering the following two options: Option 1: A unit tax of $15 Option 2: An ad valorem tax of 20% a) Find the tax incidence on buyers and producers, and...
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                         QD = 20-P                         QS = -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...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT