The market for piano lessons is as follows: Demand: Q = 80 – 2P Supply: Q = 3P Draw the supply curve, demand curve, and solve for equilibrium (tax-free) price and quantity. Solve the consumer surplus and producer surplus. Impose a tax of $5 per lesson. Solve the new price paid by the consumer, price received by the seller, the quantity now sold, and total tax revenue collected by the government. Impose a tax of $10 per lesson. Solve the new price paid by the consumer, price received by the seller, the quantity now sold, and total tax revenue collected by the government. Impose a tax of $20 per lesson. Solve the new price paid by the consumer, price received by the seller, the quantity now sold, and total tax revenue collected by the government. Draw Arthur Laffer’s curve for parts A, B, C and D. Use the solved numbers from parts A, B, C, and D on this diagram.
The market for piano lessons is as follows: Demand: Q = 80 – 2P Supply: Q = 3P Draw the supply curve, demand curve, and solve for equilibrium (tax-free) price and quantity. Solve the consumer surplus and producer surplus. Impose a tax of $5 per lesson. Solve the new price paid by the consumer, price received by the seller, the quantity now sold, and total tax revenue collected by the government. Impose a tax of $10 per lesson. Solve the new price paid by the consumer, price received by the seller, the quantity now sold, and total tax revenue collected by the government. Impose a tax of $20 per lesson. Solve the new price paid by the consumer, price received by the seller, the quantity now sold, and total tax revenue collected by the government. Draw Arthur Laffer’s curve for parts A, B, C and D. Use the solved numbers from parts A, B, C, and D on this diagram.
ChapterP2: Microeconomics Fundamentals
Section: Chapter Questions
Problem 10KC
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The market for piano lessons is as follows:
Supply: Q = 3P
- Draw the supply curve, demand curve, and solve for equilibrium (tax-free) price and quantity. Solve the
consumer surplus and producer surplus. - Impose a tax of $5 per lesson. Solve the new price paid by the consumer, price received by the seller, the quantity now sold, and total tax revenue collected by the government.
- Impose a tax of $10 per lesson. Solve the new price paid by the consumer, price received by the seller, the quantity now sold, and total tax revenue collected by the government.
- Impose a tax of $20 per lesson. Solve the new price paid by the consumer, price received by the seller, the quantity now sold, and total tax revenue collected by the government.
- Draw Arthur Laffer’s curve for parts A, B, C and D. Use the solved numbers from parts A, B, C, and D on this diagram.
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