How much of the tax is borne by consumers

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Reference no: EM1315532

Q. (a) Assume the demand also supply for a perfectly competitive market are given by:
D(P) = 90,000 - 2,000P for 0≤P≤45
S(P) = 8,000P for 0≤P≤10
Draw the supply also demand curves also solve for the equilibrium price also quantity. Illustrate what is the CS also PS?

(b) (i) Assume the price is $8.80. Illustrate what is the quantity exchanged? Is this an equilibrium price? Why or why not?

(ii) Assume the price is $9.80. Illustrate what is the quantity exchanged? Is this an equilibrium price? Why or why not?

(c) Assume a one-dollar excise tax is imposed:
D(P) = 90,000 - 2,000P for 0≤P≤45
S(P) = -8.000 + 8,000P for 1≤P≤11
Illustrate what are the new equilibrium price also quantity? Elucidate how much of the tax is borne by consumers also Elucidate how much by producers? Illustrate what is the new CS also PS? Illustrate what is tax revenue?

(d) Using the points from part (a) also part (c), compute the price elasticity of demand.

Reference no: EM1315532

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