Consider a market with the following demand and supply curves: Q (p) = 20 – 2P Q (p) = - 10 + 3P (b)Suppose the government imposed a sales tax of $0.80 per unit of output sold, find the price paid by the consumer, the price received by the supplier, the equilibrium quantity transacted, and the total tax revenue received by the government. (c)What do you think is the purpose for such tax policy? In your explanation, include a brief discussion of the importance of price elasticity of demand in the choice of commodities to be taxed in order to achieve specific policy goal(s).
Consider a market with the following demand and supply curves: Q (p) = 20 – 2P Q (p) = - 10 + 3P (b)Suppose the government imposed a sales tax of $0.80 per unit of output sold, find the price paid by the consumer, the price received by the supplier, the equilibrium quantity transacted, and the total tax revenue received by the government. (c)What do you think is the purpose for such tax policy? In your explanation, include a brief discussion of the importance of price elasticity of demand in the choice of commodities to be taxed in order to achieve specific policy goal(s).
Chapter12: The Partial Equilibrium Competitive Model
Section: Chapter Questions
Problem 12.10P
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Consider a market with the following
Q (p) = 20 – 2P
Q (p) = - 10 + 3P
(b)Suppose the government imposed a sales tax of $0.80 per unit of output sold, find the
(c)What do you think is the purpose for such tax policy? In your explanation, include a brief discussion of the importance of price elasticity of demand in the choice of commodities to be taxed in order to achieve specific policy goal(s).
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