Answered: described by the equation Q = 70 - 2P,…

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter22: The Public Sector

Section: Chapter Questions

Problem 5SQ

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Question

Suppose that the demand curve is described by the equation Q = 70 - 2P, and the supply curve is described by the equation Q = 10 + P. The government hasintroduced a $ 9 per unit consumer tax.

Define :

1) how will the equilibrium price and volume of production change;

2) what is the state's income from the introduction of this tax;

3) to what extent producers will be affected by the introduction of this tax.

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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