Sub part (a): Explanation It is given that the supply curve of pizza slopes upward and the demand curve slopes downward. Thus, the equilibrium will be determined at the intersection of the demand curve and the supply curve on the graph as follows: From the above graph, the demand curve for the pizza slopes downward and the supply curve slopes upward as given in the question. The equilibrium is obtained at the point of intersection and the equilibrium price is P1 and the equilibrium quantity is Q1 respectively. The consumer surplus in the economy is the area of A+B+C and the producer surplus is the area of D+E+F... Sub part (b): To determine The impact of tax on pizza. Sub part (c): To determine The impact of tax on pizza.

The impact of tax on pizza.

PRINC OF ECONOMICS PKG >CUSTOM<

7th Edition

ISBN: 9781305018549

Author: Mankiw

Publisher: CENGAGE C

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Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 8, Problem 1PA

Sub part (a):

To determine