ECO 108 Lecture Notes - Lecture 34: Sales Tax, Excise, Lead
Document Summary
Prices are affected by the quality and quantity (availability) of substitutes. This plays an important role in the new equilibrium. P*= per ton, qk = 10 billion pounds. At d", new demanders for titanium => problem! Without asking for tons of digging or restrictions of use, there is a rational mechanism done by changing price which follows from sharing. At p*=, we have a shortage of 6 billion pounds. Initial equilibrium, p* = , q*=10 a) b) c) Existing users: want 10, settle for 8 +2. Suppliers for initially 10, end up selling 12 +2. New users want 6, settle for 4 +2. Because we cannot answer this, a lot of questions cannot be answered and some values cannot be predicted. How does a shortage of 6 at price 14 get rational a) b) c) Suppliers for initially 10, end up selling 11 +1. New users want 6, settle for 5 +1.
