answer). Now suppose a specific tax, t > 0, is imposed on this market that has to be paid to the government by sellers. Denote the new equilibrium price (i.e., the price that is at the intersection of the demand and the shifted supply curve) by P*(t) . Give the new price that is paid by buyers (buyers' price) and the new price that is effectively received by sellers (sellers' price) in terms of P*(t) and t. Afterwards, derive an expression for the buyers' and sellers' prices and the new equilibrium quantity (call it Q*(t)) in terms of the parameters of the demand and supply equations given in the problem and the tax amount t. How does the tax incidence on the buyer vary with B. Provide an economic explanation in terms of price elasticity of demand. Now, imagine that the tax is imposed on the buyers. Explain in no more than three sentences how the buyers' and sellers' prices and the new equilibrium quantity would compare with your answers to parts (b).

answer). Now suppose a specific tax, t > 0, is imposed on this market that has to be paid to the government by sellers. Denote the new equilibrium price (i.e., the price that is at the intersection of the demand and the shifted supply curve) by P(t) . Give the new price that is paid by buyers (buyers' price) and the new price that is effectively received by sellers (sellers' price) in terms of P(t) and t. Afterwards, derive an expression for the buyers' and sellers' prices and the new equilibrium quantity (call it Q*(t)) in terms of the parameters of the demand and supply equations given in the problem and the tax amount t. How does the tax incidence on the buyer vary with B. Provide an economic explanation in terms of price elasticity of demand. Now, imagine that the tax is imposed on the buyers. Explain in no more than three sentences how the buyers' and sellers' prices and the new equilibrium quantity would compare with your answers to parts (b).

Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781305971509

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter6: Supply, Demand, And Government Policies

Section: Chapter Questions

Problem 10PA

See similar textbooks

Similar questions

Suppose that a market is described by the following supply and demand equations: QS= 2P QD= 300 - P a. Solve for the equilibrium price and the equilibrium quantity. b. Suppose that a tax of T is placed on buyers, so the new demand equation is QD= 300 - (P + 1) Solve for the new equilibrium. What happens to the price received by sellers, the price paid by buyers, and the quantity sold? c. Tax revenue is Tx Q. Use your answer from part (b) to solve for tax revenue as a function of T.Graph this relationship for T between 0 and 300. d. The deadweight loss of a tax is the area of the triangle between the supply and demand curves. Recalling that the area of a triangle is 1/2 x base x height, solve for deadweight loss as a function of T.Graph this relationship for T between 0 and 300. (Hint Looking sideways, the base of the deadweight loss triangle is T, and the height is the difference between the quantity sold with the tax and the quantity sold without the tax.) e. The government now…
Question The supply of candy is given by Qs = 20,000P where Qs is bags of candy supplied per year and P is the price per bag. The demand for candy is given by Qd = 150,000 – 30,000P a. Assuming that candy is sold in a competitive market, what is the equilibrium price and quantity? b. To discourage the consumption of candy, the government levies a tax on consumers in the amount of $1 per bag. What is the new equilibrium quantity? c. What is the impact of the tax on welfare in this market?
Suppose that a market is described by the following supply and demand equations:Qs=2PQD=300-Pa.Solve for the equilibrium price and the equilibrium quantity.b.Solve that a tax of T is placed on buyers,so the new denad equation is QD=300-(P+T).Solve for the new equilibrium.What happens to the price receive by sellers,the price paid by buyers.and the quantity sold?c.Tax revenue is TxQ.Use your answer from part(b)to solve for tax revenue as a function of T.Graph this relationship for T between 0 and 300.d.The dead weight loss of a tax is the area of a triangle between supply and demand curves.Recalling that the area of the triangle is 1/2xbasexheight,solve for the dead weight loss as afunction of T.Graph this relationship for T between 0 and 300.e.The government now levies a tax of $200per unit on this good.Is this a good policy?Why or why not?Can you propose a better policy?
Please written by computer source Given the following inverse demand and supply equations: P = 26 - 2 Q P = 2 Q 1. What is the before tax equilibrium quantity 2. What is the before tax equilibrium price 3. If the government imposes a per unit tax on each item, assuming the producers pay the tax, what is the new equilibrium quantity if the per unit tax is 4? 4. Given the change in part 3, what is the new equilibrium price 5. What is the price paid by the consumer 6. What is the price received by the producer 7. What is the per unit dollar value of the consumer's tax burden 8. What is the per unit dollar value of the producer's tax burden For the remaining questions, assume that the government imposed tax in part 3 is paid by the buyer. 9. What is the new equilibrium quantity 10. What is the new equilibrium price 11. What is the price paid by the consumer 12. What is the price received by the producer 13. What is the per unit dollar value of…
The demand and supply functions for three (03) goods are given as follows: Dx = 100-3Px+Py+3Pz Dy = 80+Px-2Py-Pz Dz = 120+3Px-Py-4Pz Sx = -10+Px Sy = -20+3Py Sz = -30+2Pz determineThe equilibrium prices and quantities of all three goods are? The government decides to: Impose a 25% Tax on X? Impose a 5 Rs /unit Tax on Y? Give a 10% subsidy on good z? Analyze the impact of each of these policies separately on equilibrium prices and quantities? Also calculate changes in consumer and producer surpluses, and amount of revenue earned by the government? Repeat this exercise when policies (a, b), (b, c) and (a, b, c) are jointly implemented. Which policy choice is best? Why? Provide theoretical justification (using diagrams) of all results obtained?
Consider a market where demand and supply satisfy the following equationsQd = 12 – 2 P,QS = 2P.a)Find the current equilibrium price and quantity. b)What is the total producer surplus if the market is in equilibrium? The government is considering a minimum price policy to increase producer surplus.c)Explain by means of graphs how the introduction of a price floor can increase producer surplus. d)Find the (optimal) price floor that maximizes producer surplus. hi, can you answer part c and part d for this question please, thanks
Consider a market where demand and supply satisfy the following equations QD = 12 – 2 P, QS = 2P. Find the current equilibrium price and quantity. 2What is the total producer surplus if the market is in equilibrium? The government is considering a minimum price policy to increase producer surplus. 3Explain by means of graphs how the introduction of a price floor can increase producer surplus. 4Find the (optimal) price floor that maximizes producer surplus.
Q^d= 9.5 - 2p Q^s= 0.6p Tax. Suppose that the government imposes a tax equal to T = 0.50 which must be paid by buyers for every donut they purchase. (a) How does this tax change the supply and/or demand curve for donuts? (b) Solve for the new equilibrium price and quantity of donuts. Give the price paid by the buyer and the price received by the seller. (c) Draw a single supply and demand diagram that compares the equilibrium with and without the tax. Be sure to indicate the equilibrium quantity of donuts sold as well as the price paid by buyers and the price received by sellers in each case. On the same diagram, indicate the areas which represent consumer and producer surplus, tax revenue and the deadweight loss arising from this tax. (d) Calculate the amount of producer and consumer surplus at this new equilibrium price and quantity, as well as the amount of tax revenue and the deadweight loss. (e) Is total surplus higher than, lower than or the same as in question one? Give an…
Q^d= 9.5 - 2p Q^s= 0.6p Tax. Suppose that the government imposes a tax equal to T = 0.50 which buyers must pay for every donut they purchase. (a) How does this tax change the supply and/or demand curve for donuts? (b) Solve for the new equilibrium price and quantity of donuts. Give the price paid by the buyer and the price received by the seller. (c) Draw a single supply and demand diagram that compares the equilibrium with and without the tax. Be sure to indicate the equilibrium quantity of donuts sold as well as the price paid by buyers and the price received by sellers in each case. On the same diagram, indicate the areas which represent consumer and producer surplus, tax revenue and the deadweight loss arising from this tax. (d) Calculate the amount of producer and consumer surplus at this new equilibrium price and quantity, as well as the amount of tax revenue and the deadweight loss. (e) Is the total surplus higher, lower, or the same as in question one? Give an…
Assume the market for good Y is in equilibrium. (a) Draw a correctly labeled demand and supply graph for good Y. Label the equilibrium price PePe and the equilibrium quantity QeQe. (b) Assume the government imposes a per-unit tax on good Y. On your graph in part (a), show each of the following after the tax has been implemented. (i) The equilibrium price labeled PNPN and the equilibrium quantity labeled QNQN (ii) The area representing the change in consumer surplus, shaded completely (c) Will the price paid by consumers increase by the same amount as the tax? Explain. (d) Will the loss in consumer and producer surplus be greater than, less than, or equal to the tax revenue collected by the government? Explain.
Consider the following market supply and demand information for cigarettes: Price ($) Demand for Cigarettes (in million packs per week) $2 12 3 10 4 8 5 6 6 4 7 2 and the supply is 8,000,000 cigarette packs per week. 1. Plot the demand and supply curves and label them carefully. What are the equilibrium price and equilibrium quantity of cigarettes bought and sold? 2. Now…
The demand for a good is given by QD = 99−3P and the supply by QS = 2P + 4. The market for this good is in equilibrium. Now, the government introduces a tax of $5 per unit to be paid by the producers. How large is the consumer surplus, producer surplus, and total welfare generated by this market after the introduction of the tax? Show your calculations. Sketch the market diagram and label all relevant prices and quantities.