The demand and supply in the market for textbooks are described by the following equations: Q D = 200 - P QS = 2P 40 - The government is considering a unit tax of 30 dollars on textbooks. (a) Draw a supply and demand diagram. Label on your diagram the following: The free-market equilibrium price P * and quantity Q* . The quantity bought and sold with the tax in place QT The deadweight loss, as a shaded area (b) Find a numerical value for the deadweight loss caused by the tax. The government scraps the plan for a tax and instead proposes a 50-dollar price ceiling on textbooks. (c) Draw a supply and demand diagram. Label on your diagram the following: The free-market equilibrium price P * and quantity Q* . The quantity demanded with the price ceiling in place QD The quantity supplied with the price ceiling in place QS The consumer surplus with the price ceiling in place, as a shaded area (d) Are consumers better off with the price ceiling in place? Justify your answer by calculating the change in consumer surplus when the price ceiling takes effect.
The demand and supply in the market for textbooks are described by the following equations: Q D = 200 - P QS = 2P 40 - The government is considering a unit tax of 30 dollars on textbooks. (a) Draw a supply and demand diagram. Label on your diagram the following: The free-market equilibrium price P * and quantity Q* . The quantity bought and sold with the tax in place QT The deadweight loss, as a shaded area (b) Find a numerical value for the deadweight loss caused by the tax. The government scraps the plan for a tax and instead proposes a 50-dollar price ceiling on textbooks. (c) Draw a supply and demand diagram. Label on your diagram the following: The free-market equilibrium price P * and quantity Q* . The quantity demanded with the price ceiling in place QD The quantity supplied with the price ceiling in place QS The consumer surplus with the price ceiling in place, as a shaded area (d) Are consumers better off with the price ceiling in place? Justify your answer by calculating the change in consumer surplus when the price ceiling takes effect.
Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN:9781305971493
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter6: Supply, Demand And Government Policies
Section: Chapter Questions
Problem 4PA
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