Compute elasticity of demand and supply at the equilibrium

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Reference no: EM131244290

The market for cereal is characterized by the demand equation: QD=35-20P And supply is characterized by: QS=5P-40 .

a. Find the equilibrium in the market for cereal. Show your work.

b. Compute the elasticity of demand and supply at the equilibrium. Show your work.

c. A tax of $1 per box is imposed on consumers of cereal. Draw the supply and demand in the market for cereal, and draw the effect of tax in the market. Make sure to label all axes and equilibria.

d. Who bears the greater incidence of the tax? Briefly explain.

Reference no: EM131244290

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