Taxation Question (SHOW ALL WORK)
Suppose that the demand curve (hundreds) for apples is given by Qd = 140 - 5P, where Qd is the number of pounds demanded per year and p is the price per pound. The supply of apples can be described by Qs = 40 + 5P, where Qs is the number of pounds provided.
What is the equilibrium price? (Hint: At the equilibrium, quantity demanded and quantity supplied are equal, Qd = Qs.)
What is the equilibrium quantity supplied and demanded?
Calculate the consumer surplus at the equilibrium price.
Calculate the producer surplus at the equilibrium price.
Calculate the total surplus at the equilibrium price.
Now suppose that the government imposes a tax of $8 per each pound sold, paid by the producers. In this case, what are the price and the consumer surplus?
Taxation Question (SHOW ALL WORK)
Suppose that the demand curve (hundreds) for apples is given by Qd = 140 - 5P, where Qd is the number of pounds demanded per year and p is the price per pound. The supply of apples can be described by Qs = 40 + 5P, where Qs is the number of pounds provided.
What is the equilibrium price? (Hint: At the equilibrium, quantity demanded and quantity supplied are equal, Qd = Qs.)
What is the equilibrium quantity supplied and demanded?
Calculate the consumer surplus at the equilibrium price.
Calculate the producer surplus at the equilibrium price.
Calculate the total surplus at the equilibrium price.
Now suppose that the government imposes a tax of $8 per each pound sold, paid by the producers. In this case, what are the price and the consumer surplus?
