Suppose the following demand and supply function of a commodity. Qd = 55 - 5P Qs = -50 + 10P After imposing tax, the new supply function is Qs = -60 + 10P Find out the equilibrium price and quantity before tax.Find consumer and producer surplus before tax.Determine government revenue and dead weight loss after tax.

1. At the equilibrium, Qd = Qs 55 - 5P = -50 +10 P 15P = 105 P = 7 So, Q = 55- 5(7) Q = 20…

Answered: Suppose the following demand and supply…

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter2: The One Lesson Of Business

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Suppose the following demand and supply function of a commodity.

Q^d = 55 - 5P

Q^s = -50 + 10P

After imposing tax, the new supply function is

Q^s = -60 + 10P

Find out the equilibrium price and quantity before tax.
Find consumer and producer surplus before tax.
Determine government revenue and dead weight loss after 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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