Given the following information: QD= 240-5P QS= P Where QD is the quantity demand, QS is the quantity supplied and P is the price. Suppose the government decides to impose tax of $12 per unit on sellers in the market. Determine:      Deadweight loss of the tax _____________. Determine:      total surplus after tax _____________.

Meaning of Quantity Demanded and Quantity Supplied:

The term quantity demanded is the situation where a particular product quantity is being purchased by the consumer at a given market price, thus an increase in the product value and price leads to decreases in quantity demanded.

On the other side, the term quantity supplied refers to the situation where a particular product quantity being sold at a specific quantity demanded, thus an increase in the price of a product, leads to fallen demand and thus reduces the quantity supplied for the product.

Given:

Qd = 240-5p

Qs = P

Qd is the Quantity Demanded:

Qs is the Quantity Supplied:

P is the Price:

The government imposes a tax at: $12

To Find:

Deadweight loss and total surplus after tax

Equilibrium:

$$\begin{gathered} Equilibrium Quantity: \\ QD = QS \\ 240 - 5P = P - 12 \\ 6P = 252 \\ P =\frac{252}{6} \\ P = 42 \end{gathered}$$

• Consumer's Price After Tax: $42
• Producer's Price After Tax:

$$\begin{gathered} Producer\text{'}s Price After Tax = \$42-\$12 \\ Producer\text{'}s Price After Tax = \mathbf{\$}\mathbf{30} \end{gathered}$$

• Quantity After Tax:

$$\begin{gathered} Quantity After Tax: \\ QD = QS \\ = \mathbf{\$}\mathbf{30} \end{gathered}$$