Using algebra find the equilibrium price, Macroeconomics

The demand equation for champagne is given by P = 10 - Q. The supply schedule for champagne is given by P = Q. Note that P denotes price per bottle in dollars, and Q is quantity measured in thousands per week.

 a. Use algebra to find the equilibrium price of champagne, the equilibrium quantity traded, and the total revenue of champagne makers.

 b. Now suppose the government imposes a per unit tax on champagne of $2 per bottle. That is, each time champagne producers sell a bottle of champagne they have to pay the government a tax of $2. What is the new supply equation with the tax?

 c. What is the new equilibrium price and quantity with the tax?

 d. How much of the $2 tax is paid by the consumers? How much of the $2 tax is paid by the producers?

 e. Show the effect of the tax in a diagram by graphing the original demand and supply equations and then drawing in the supply equation after the tax into the same diagram. Indicate the equilibrium price and quantity before and after the tax. Also indicate the net price per bottle after the tax (i.e. the price received by the producers once they have paid the tax).

 f. Use the diagram to calculate the deadweight loss from the tax.

 g. How much revenue does the government raise from the tax? 

 

 

Posted Date: 2/27/2013 7:40:34 AM | Location : United States







Related Discussions:- Using algebra find the equilibrium price, Assignment Help, Ask Question on Using algebra find the equilibrium price, Get Answer, Expert's Help, Using algebra find the equilibrium price Discussions

Write discussion on Using algebra find the equilibrium price
Your posts are moderated
Related Questions
Macroeconomic performance The UK's future macroeconomic performance must be judged on how average living standards improve, inflation is kept under control, economy grows and

when domestic currency becomes more valuable in terms of foreign currency, the domestic currency is said to have

According to Bowen, Leamer, and Sveikauskas, which of the following is true? a. A nation indirectly exports its most abundant factors of production. b. A nation indirectly im

ihave real gdp per capita for all countries in world .. how can i calculate world real gdp per capita by using the data.

Given the data in the table below, provide an estimate of the arc price elasticity of demand for green and chai tea. Chai tea Price $/lb. 10.4, 10.5 Chai tea Quantity mil lbs. 75

What is Consumer Price Index CPI is a price index of a specific basket known as the CPI-basket. CPI-basket contains essentially all the service and goods consumed in a country

Macroeconomics: Question 1 and 2 relate to content and skills covered --- OPEN-MARKET MACROECONOMICS: BASIC CONCEPTS , International Trade and Exchange Rates Question 3 relates to

Positive and normative economics -introductiion Economic theory or analysis evolves from basic propositions about how individual human beings (or individual economic units) beh

From stock and Watson 3rd edition introduction to econometrics Using the data set Teaching Ratings described, carry out the following exercises. a) Run a regression of Course

Because of high production-changeover time and costs, a director of manufacturing must convince management that a proposed manufacturing method reduces costs before the new method