The demand (D) and supply (S) function for a commodity are P=100 - 20 andP = 10 + Q, respectively. (a) Find the equilibrium price and quantity. That is, find the price andquantity where the D and S functions intersect. (b) A new 10% tax is imposed on thiscommodity. Find the burden of the tax on demanders and the burden on suppliers. Also findthe total taxes.[In order to insure that we all do this problem in the same way, let's assume that the tax isimposed on the supply side of the market. In addition, the burden of the tax on demanders isthe difference in price demanders pay when the tax is in existence less the price they paidwhen there was no tax. The burden on suppliers is the difference in price suppliers receivedwhen there was no tax and the net price (after remitting tax to the government) they receivewhen the tax is in existence.]

Given Demand : P = 100-2Q Supply : P = 10+Q Equilibrium QUANTITY = 100-2Q = 10+Q…

The demand (D) and supply (S) function for a commodity are P=100 - 20 and P= 10 + Q, respectively. (a) Find the equilibrium price and quantity. That is, find the price and quantity where the Dand S functions intersect. (b) A new 10% tax is imposed on this commodity. Find the burden of the tax on demanders and the burden on suppliers. Also find the total taxes.

The demand (D) and supply (S) function for a commodity are P=100 - 20 and P= 10 + Q, respectively. (a) Find the equilibrium price and quantity. That is, find the price and quantity where the Dand S functions intersect. (b) A new 10% tax is imposed on this commodity. Find the burden of the tax on demanders and the burden on suppliers. Also find the total taxes.

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter17: Taxation And Resource Allocation

Section: Chapter Questions

Problem 4TY

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