Question The market demand and supply functions for product are given | Economics 2080.1

Economics2080.15 marksNumerical: market equilibrium price outputIndirect tax effects on equilibrium

Question

The market demand and supply functions for product are given below:

$Q_d = 500 - 5P$ $Q_s = 100 + 5P$

a) Find the equilibrium price and output.

b) If the sales tax (indirect tax) of Rs. 10 per unit is imposed by the government, what will be the new equilibrium price and output? [5+0]

Question

The market demand and supply functions for product are given below:

$$Q_d = 500 - 5P$$ $$Q_s = 100 + 5P$$

a) Find the equilibrium price and output.

b) If the sales tax (indirect tax) of Rs. 10 per unit is imposed by the government, what will be the new equilibrium price and output? [5+0]

Demand function: $Qd = 500 - 5P$ - Supply function: $Qs = 100 + 5P$ - Sales tax (part b): Rs. 10 per unit --- At equilibrium, $Qd = Qs$ : $500 - 5P = 100 + 5P$ $400 = 10P$ $P = 40$ Equilibrium Price = Rs. 40 per unit Quantity: $Qd = 500 - 5(40) = 300$ Check: $Qs = 100 + 5(40) = 300$ ✓ Eq...

Demand function: $Qd = 500 - 5P$ - Supply function: $Qs = 100 + 5P$ - Sales tax (part b): Rs. 10 per unit --- At equilibrium, $Qd = Qs$: $$500 - 5P = 100 + 5P$$ $$400 = 10P$$ $$P = 40$$ Equilibrium Price = Rs. 40 per unit Quantity: $$Qd = 500 - 5(40) = 300$$ Check: $Qs = 100 + 5(40) = 300$ ✓ Eq...

Question The market demand and supply functions for product are given below: a) Find the equilibrium price and output. b) If the sales tax (indirect tax) of Rs. 10 per unit is imposed by the government, what will be the new equilibrium price and output? [5+0]