QUESTION 2 QD-148-4P and Qs =-337 + 70P before a tax of $2 is added to each unit

Question

QUESTION 2 QD-148-4P and Qs =-337 + 70P before a tax of $2 is added to each unit of the good. What is the post tax equilibrium quantity? Hint: Becouse suppliers make their decision based on how much they receive after tax, the new supply function is: Qs--33770(P-2) ROUND TO THE NEAREST TWO DECIMAL PLACES QUESTION 3 QD-106-4P and Qs =-446 + 88P before a tax of $1 is added to each unit of the good. What is the total amount of taxes paid by consumers? 88(P-1) 1 Hint: Because suppliers make their decision based on how much they receive after tax, the new supply function is: Qs446 ROUND TO THE NEAREST CENT

Explanation / Answer

2.

After the implementation of tax,

Qd = 148-4P

And

Qs = -337 + 70*(P-2)

At equilibrium,

Qd = Qs

148-4P = -337 +70*(P-2)

148+337+140 = 4P+70P

74P = 625

P = 625/74 = $8.45

Q = 148-4*8.45

Q = 114.2 units

So, post tax equilibrium quantity is 114.2 unit.

3.

Before the tax is implemented,

Qd= Qs at equilibrium

106-4P = -446+88P

P = (106+446)/92

P= $6

After the tax of $1 is implemented,

Qd = New Qs

106-4P = -446 + 88*(P-1)

106+446+88 = 4P+88P

P = $6.96

Q = 106-4*6.96

Q = 78.16 units

So, total amount of tax paid by the consumers = 78.16*(6.96-6) = $75.03

                                                                                                                                                 

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