2. Suppose demand and supply are given by Qd, =7-P, and Qs, =P- a. Determine the equilibrium price and quantity and interpret your answer clearly. b. Suppose a $6 excise tax is imposed on the good. Determine the new equilibrium price and quantity. c. Show the existing and new equilibrium graphically, given that there is an excise tax imposed on the good. Also, interpret your graph briefly (1 to 2 sentences only). d. Given the $6 excise tax, how much is the consumer and producer surpluses? Interpret your result (1 sentence only). e. Given the $6 excise tax, how much is the deadweight loss? Interpret your result (1 sentence only).
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- Suppose you learned that the price elasticity of demand for wheat is 0.7 between the current price for wheat and a price 2 higher per bushel. Do you think that farmers collectively would try to reduce the supply of wheat and drive the price up 2 higher per bushel? Explain your answer. Assuming that they would try to reduce supply, what problems might they have in actually doing so?Suppose demand and supply are given by Qxd = 14 − 1/2 Px and Qxs = 1/4 Px −1 a. Determine the equilibrium price and quantity. Show the equilibrium graphically. b. Suppose a $12 excise tax is imposed on the good. Determine the new equilibrium price and quantity.Question 3 Suppose the demand for a product is given by Q-100-5P, where Qp is quantity per year measured in kilogram and P is the price in AUD per kilogram. The supply curve for this product is given by Qs=4P-8. Answer the following questions and provide a graph illustration. a) Determine the equilibrium price? b) Calculate the elasticity of demand and supply at the equilibrium price. c) Determine the consumer surplus and producer surplus at the equilibrium price? d) Suppose that the government imposes a floor price of A$15 and promises to buy any surplus (e.g., Q³- QD) on the market. Determine the new consumer surplus, the new producer surplus, and the government expenditure of this policy e) Instead of using the floor price, now the government imposes a A$3 tax on each kg sold, determine the market price after having this tax policy. f) Calculate the consumer surplus, producer surplus and tax revenue. g) Using the concepts of demand and supply elasticity, predict which party, the…
- Suppose the coffee market in the US is given by the following equations for supply and demand: Qs = 9+0.5p Qp = 12 – p where Q is the quantity in millions of tons per year and p is the price per pound. (a) Calculate the equilibrium price and quantity of coffee. (b) At the equilibrium price, what is the price elasticity of demand? (c) Suppose a tax of $0.75 is imposed on coffee producers. Calculate the new equilibrium price and quantity. What is the amount of the tax burden on consumers (hint: by how much has the price per pound consumers pay change?).2. Suppose that the market for milk can be represented by the following equations: Demand: P = 12-0.5QD P = 0.1Qs Supply: where P is the price per gallon, and Q represents quantity of milk, represented in millions of gallons of milk consumed per day. a) Calculate the equilibrium price and quantity of milk. b) To help dairy farmers, the government sets a minimum price of $2.50 per gallon of milk. What is the new quantity of milk sold in the marketplace? c) Illustrate your answers to (a) and (b) on a graph. Using this graph, calculate how the consumer surplus and producer surplus change after the price supports are enacted. Also calculate any deadweight loss that results. d) Suppose that the government supports the $2.50 per gallon price by purchasing any excess milk suppliers make available but are unable to sell to consumers. How much milk must the government buy?Graph the following In the market for smartphones, the price elasticity of supply is +0.8, and the price elasticity of demand is -1.2. At equilibrium, price is $800 and quantity is 400000. (1a) Assuming supply and demand are linear, reconstruct and draw the supply and demand curves. Label the intercepts. (1b) To help consumers and phone-makers, the government proposes to subsidize smartphones by $80 each. What are PB and PS after the subsidy? What is the new equilibrium quantity? Illustrate them on the same graph. (c) Calculate the change in consumer surplus, producer surplus, government expenditure, and deadweight loss and identify them on the graph.
- Suppose that in the absence of any tax whatsoever, the equilibrium price of beer is €1.50 per pint. Now suppose that the government requires beer drinkers to pay a total tax (sales tax plus alcohol duty) of €0.50 on every pint of beer purchased. a) Draw a supply-and-demand diagram of the market for beer without the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers?b)Now draw a supply-and-demand diagram for the beer market with the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers? Has the quantity of beer sold increased or decreased?QXd = 14 - 0.5PX and QXs = 0.25PX - 1 a. Determine the equilibrium price and quantity. Show the equilibrium graphically. b. Suppose a $12 excise tax is imposed on the good. Determine the new equilibrium price and quantity (see video on inverse functions).Suppose the supply and demand curves for a particular product are given by Qs=-20+2p Qd=100-2p Where Qs and Qd are quantities in units and P is the price per unit. Graph the supply and demand curves. Be sure to calculate the P and Q intercepts for demand and the P intercept for supply. Calculate and illustrate the equilibrium price and quantity. Calculate both the demand and supply elasticity around the equilibrium point. Suppose the government implements a price ceiling of $20/unit in this market. Is the price ceiling binding on the market? What are the quantities demanded and supplied at the price ceiling? How many units are exchanged at this price? Given the effects of the policy, is there a potential for illegal trade? Briefly explain your answers where necessary. What is the value of the economic surplus that would be generated in the original equilibrium? Is there a deadweight loss due to the price ceiling policy, and if so, what is its value? Briefly explain.
- Find the price for good Z and the quantity supply for good X (show all the calculations) if: (i) (ii) If the elasticity of demand is 0.5 and the quantity demanded decreases from 95.000 to 85.000. Draw the graph and indicate the equilibrium price and quantity (iii) The elasticity of supply is equal to 1 and the price increases from $40 to $50 Price per Tonne ($) 40 50 60 80 N 110 Quantity demanded 150 120 110 95 85 80 Quantity supplied 80 X 110 115 120 1401. Suppose the demand and supply curves for a large specialty pizza are given by: Qd = 400-20P Qs = -50 +10P. a) Using the demand and supply functions above, the equilibrium price of a pizza is ________, and the equilibrium quantity is ___. Illustrate your answer. b) Compute CS and PS and illustrate on a graph. c) Suppose that the government decrees that a specialty pizza cannot be sold above $12. As a result of the decree, CS will increase/decrease by _________; PS will increase/decrease by _.Show computations. DWL will equal . Show all computation below.Suppose the market for frozen orange juice is in equilibrium at price of $2.00 per can and a quantity of 4200 cans per month. Now suppose that at a price of $3.00 per can, quantity demanded falls to 3000 cans per month and quantity supplied increases to 4500 cans per month. i. Draw the appropriate diagram for this market. Calculate the price elasticity of demand for frozen orange juice between the prices of $2.00 and $3.00. Is the demand elastic or inelastic? ii. iii. 2 Calculate the elasticity of supply for frozen orange juice between the price of $2.00 and $3.00. Is the supply elastic or inelastic?