Question The market demand and supply function are given as: Qd = 500 | Economics 2081

Economics20815 marksNumerical: market equilibrium price outputIndirect tax effects on equilibrium

Question

The market demand and supply function are given as: $Q_d = 500 - 5P$ and $Q_s = 100 + 5P$

a. Find the equilibrium price and output.

b. If the indirect tax of Rs 8 per unit is imposed by the government what will be the new equilibrium price and output? [5+0]

Question

The market demand and supply function are given as: $Q_d = 500 - 5P$ and $Q_s = 100 + 5P$

a. Find the equilibrium price and output.

b. If the indirect tax of Rs 8 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: $Qs = 100 + 5P$ - Indirect tax (part b): Rs 8 per unit --- At equilibrium: $Qd = Qs$ $500 - 5P = 100 + 5P$ $400 = 10P$ $P = 40$ Equilibrium Price = Rs 40 per unit Substitute back: $Q = 500 - 5(40) = 300$ Check: $Qs = 100 + 5(40) = 300$ ...

Demand function: $Qd = 500 - 5P$ - Supply function: $Qs = 100 + 5P$ - Indirect tax (part b): Rs 8 per unit --- At equilibrium: $Qd = Qs$ $$500 - 5P = 100 + 5P$$ $$400 = 10P$$ $$P = 40$$ Equilibrium Price = Rs 40 per unit Substitute back: $$Q = 500 - 5(40) = 300$$ Check: $Qs = 100 + 5(40) = 300$...

Question The market demand and supply function are given as: Qd = 500 - 5P and Qs = 100 + 5P a. Find the equilibrium price and output. b. If the indirect tax of Rs 8 per unit is imposed by the government what will be the new equilibrium price and output? [5+0]