Question

ke Suppose that a certain product has the following demand and supply functions D: p = – 0.05 g + 65 S: p = 0.05 q + 10 If a $ 5 tax per item is placed on the product, the market equilibrium point after tax is (400 , 50) (40 , 500) (500 40) (50 ,400)

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Abdul-Rahim Taysir

Answer 1

Given demand and supply functions. D: P = -0.059 +65 0.059 +10 S: P = with a $ 5 tax the supply curve after 1 tax p = 0.052 +10+5 ²P =0.052 +15 after tax a - Р -0.052 +65 0.05qtis market equilibrium is solution of equations ① & ② adding & 2P 65 +15 =BO P 40 Putting pa 40 in ② - 500 0.054 +15 2 = 25 0.05 Hence the equilibrium is (40,500) second option is correct.