You are examining the effects of a specific tax of 10 cents imposed on the sales of a product that we shall call XYZ. To carry out your analysis, assume that the market is a perfectly competitive one. You are provided with the following data:

(1) Economists have estimated the demand function for product XYZ to be:

QD = 20 – 0.50 P

Where P is the price of the product (in cents) and QD is the quantity demanded (in thousands).

(2) The supply curve for the product XYZ has been estimated to be:

QS = 0.50 P

Where QS is the quantity supplied of XYZ (in thousands).

Please answer the following:

(1) Compute numerically the equilibrium quantity sold of XYZ and the equilibrium price before the tax.

Posted Date: 2/7/2012 2:25:05 AM | Location : United States

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