Homework 5, Macroeconomics


Instructions


For the following 10 questions, consider an economy which is initially in equilibrium without a tax, with P* of $90 and Q* of 10. Later, a tax is put on the market that changes the quantity to 5, the price paid by buyers to $120 and the price received by sellers to $70. The supply and demand curves are smooth, straight lines, with the vertical intercept for the demand curve at 150 and the vertical intercept for the supply curve at 50.

1. What is consumer surplus before the tax?

2. What is producer surplus before the tax?

3. What is the amount of the tax (per unit)?

4. What is consumer surplus after the tax?

5. What is producer surplus after the tax?

6. What is the tax incidence for buyers (per unit)? Write your answer in absolute value (regardless if it is an increase or a decrease).

7. What is the tax incidence for sellers (per unit)? Write your answer in absolute value (regardless if it is an increase or a decrease).

8. What is the amount of tax revenue?

9. What is the amount of deadweight loss?

10. Which side of the market is more elastic, from your findings, and what does this imply about the slope of the curve?

A. Demand is more elastic than supply and the demand curve is flatter than the supply curve.
B. Demand is more elastic than supply and the demand curve is steeper than the supply curve.
C. Supply is more elastic than demand and the supply curve is flatter than the demand curve.
D. Supply is more elastic than demand and the supply curve is steeper than the demand curve.
Posted Date: 7/9/2012 12:07:53 AM | Location : United States







Related Discussions:- Homework 5, Assignment Help, Ask Question on Homework 5, Get Answer, Expert's Help, Homework 5 Discussions

Write discussion on Homework 5
Your posts are moderated
Related Questions
Q. Describe Endogenous growth theory? Endogenous growth theory or new growth theory was developed in the 1980s by Paul Romer and others. In neo-classical model, technological p

Q. Illustrate the Says Law? With Say's Law, aggregate demand would always be equal to aggregate supply and cross model would be incorrect.  Keynes's argument as to why Say's

As previously stated, the aim of the paper is to observe and analyse the effects of oil price shocks on key macroeconomic indicators in the UK economy. From this the aim is to conc

Assume that Jimmy Cash has $2000 in his checking account and uses his checking card to withdraw $200 from his ATM machine. By what amount did M1 change from this individual transac

As it turns out, there is little evidence to support a direct causation between income and children. (If I am poor, then I will decide to have a lot of children? Alternatively: I h

I will need to upload a file as the questions are bit too long to type

given the consumer maximizing problem subjest to consumption, the firm''s maximizing problem subject to revenue as a function of labour demand, and the government''s budget as G=T.

The IS-curve in the AS-AD model The IS-curve is not affected by P in the AS-AD model We can define an IS-curve in the AS-AD model similarly to

Determine the term- Nominal wages The nominal wage is wage per unit of time in currency used in the country- what we mainly just call wage. When we refer to wage in macroeconom

If equilibrium price falls and the equilibrium quantity of the good purchased decreases, what has happened to either the supply curve or to the demand curve? a. Demand decreased