Demand: p = 80 - 5Q Supply: p = 24 + 20 a. Plot the demand and supply curves on a scale diagram. b. Compute the equilibrium price and quantity. C. Now suppose the government imposes a tax of 14 cents per litre. Show how this affects the market equilibrium. What is the new "consumer price" and what is the new "producer price"?

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
answer quickly
Demand: p = 80 - 500
Supply: p = 24 + 2Q°
a. Plot the demand and supply curves on a scale diagram.
b. Compute the equilibrium price and quantity.
C. Now suppose the government imposes a tax of 14 cents per litre. Show how this affects the market equilibrium. What is the new "consumer price" and what is the new
"producer price"?
d. Compute the total revenue raised by the gasoline tax. What share of this tax revenue is "paid" by consumers, and what share is "paid" by producers? (Hint: If the
consumer price were unchanged from the pre-tax equilibrium, we would say that consumers pay none of the tax.)
Transcribed Image Text:Demand: p = 80 - 500 Supply: p = 24 + 2Q° a. Plot the demand and supply curves on a scale diagram. b. Compute the equilibrium price and quantity. C. Now suppose the government imposes a tax of 14 cents per litre. Show how this affects the market equilibrium. What is the new "consumer price" and what is the new "producer price"? d. Compute the total revenue raised by the gasoline tax. What share of this tax revenue is "paid" by consumers, and what share is "paid" by producers? (Hint: If the consumer price were unchanged from the pre-tax equilibrium, we would say that consumers pay none of the tax.)
Expert Solution
steps

Step by step

Solved in 3 steps with 1 images

Blurred answer
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education