ECON 4070 Midterm: ECON 4070 York Fall 04 Midterm a
Document Summary
Suppose a tax on hotel accommodation were introduced, of per night per room. How much would the (tax included) price of hotel accommodation increase, if the hotel industry were competitive, and had a supply curve with the equation and a demand curve with the equation qs = 5000 + ps. In equilibrium, quantity demanded equals quantity sup- plied. If the tax is t per hotel room, then p d = ps + t, so that the equations of the supply and demand curve imply that. T) = 6000 9p d or (1 1) Alternatively, you can just plug in the formula for linear supply and demand curves. If the demand curve has the equation a bp d, and the supply curve the equation c + dps, then the tax included price is (1 2) In this question a = 6000, b = 9, c = 5000 and d = 1. Plugging into equation (1 2) gives equation (1 1).
