Solution-Equilibrium price and equilibrium quantity

Equilibrium price and equilibrium quantity

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Demand in the sugar market is given by Qd = 30 - p. The supply in this market is given by Qs = 2P. P is measured in kronor and Q in kg.

a) Illustrate the market equilibrium in a diagram! What will be the equilibrium price and equilibrium quantity?

Suppose Sweden wants to follow Norway's example and introduce a tax on sugar, which will be paid by the producer. The tax is a unit tax of t = SEK 1.5 / kg.

b) Illustrate in a supply and demand diagram, calculate and explain in detail in text what the welfare effects the introduction of the tax will have.

c) Explain the concept of tax incidence and link it to your results!

d) The appearance of supply and demand curves affects the magnitude of the effects in b), explain how!

Reference no: EM132488641

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Equilibrium price and equilibrium quantity

Reference no: EM132488641

Reference no: EM132488641

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