Find out market equilibrium price and quantity , Microeconomics

Question

Suppose you work for the state government of California. Due to the heavy traffic jam on I-880, the state has decided to decide to construct a new highway. To fund a part of construction, the state needs to generate tax revenue. You, as a tax analyzer in the government, need to propose the amount of the tax. After careful examination, you have decided that collecting tax from the consumption of notebook PC. A consumer pays $t per unit of notebook PC consumed. The demand and the supply curves in free market (without tax) are represented by the following equations:

D: QD = 80,000 - 20P

S: QS = 30P - 20,000

(i) What are the market equilibrium price (P*) and quantity (Q*) in the notebook PC market in California when no tax is imposed.

(ii)  What is the price elasticity of demand at the market equilibrium when no tax is imposed?

Now assume that a per unit tax, t = $10 is imposed to the consumers.

(iii) What is the new market equilibrium price under the tax policy? What is the price that buyers pay (PB)? Price that sellers receive (PS)?

(iv) You have been asked to find the amount of per unit tax t that would maximizes the tax revenue from this market. Let's denote the tax revenue maximizing t by tMAX. Find out tMAX.

Posted Date: 2/15/2013 1:41:52 AM | Location : United States







Related Discussions:- Find out market equilibrium price and quantity , Assignment Help, Ask Question on Find out market equilibrium price and quantity , Get Answer, Expert's Help, Find out market equilibrium price and quantity Discussions

Write discussion on Find out market equilibrium price and quantity
Your posts are moderated
Related Questions
elasticity of demand

Are there any economic effects to non-Hispanic whites, given that they no longer represent the majority of the population? Why are these examples important from an economic standpo

how does compensated demand curve help managers?


Q. What do you mean by Bond? Bond: A financial security that represents promise of its issuer (generally a company or a government) to repay a loan over a specified time period

FACTORS RESPONSIBLE FOR POLICY FAILURES: It is the subject of many official and academic studies to try and find out the reasons for the inability of many, in fact, most of th

Benefits of Education The returns a person/society (state/government) gets from acquiring education is referred to as benefits from education. If such returns are paid/receive

During the 1990s, technological advance reduced the cost of computer chips. Explain, with the use of supply and demand diagrams, how the following markets are affected in terms of

discuss the term of price mechanism,give examples to elaborate the concept clearly

illustrate graphically the influence of an increase in immigrants on the market supply of labour