Question

Question 1 1/4 pts Supposethat in the market for anas,wihout a per-unt t in pc demand is given by the function Do : 50 12P, and supply is given by the function So :Q (-18) 8P. Use this information to answer the following questions (round to the nearest hundredth if needed). 1.) What is the market price without a per-unit tax in place, Po? 3.4 2) If a per-unit tax of τ 0.25 is levied on sellers, what is the market price, P? 3.7 3.) What is the total amount of revenue that sellers keep with the per-unit ax in place? 16.52 4.) If the T 0.25 were not in place, how much additional revenue would sellers keep (i.e., how much revenue do sellers lose out on due to the per- unit tax)? 15

Correct answers are 1)3.4 2)3.5 3)26 4)5.28 i dont know how though

Answer 1

By substituting values of P in Qd, Qs and Qs+tax we get the results as below

P	Qd	Qs	Qs+tax = -18+8*(P-0.25)
0	50	-18	-20
1	38	-10	-12
2	26	-2	-4
3.4	9.2	9.2	7.2
3.5	8	10	8
5	-10	22	20

1. From the above table, the market price without a per unit-tax is 3.4, or by solving equation

Qd=Qs

50-12P=-18+8P

68=20P

P=3.4

Q= 50-12*3.4 = 9.2

2. With tax,

Qd=Qs

50-12P=-18+8(P-0.25)

50-12P = -18+8P-2

70=20P

P= 3.5

Q = 50-12*3.5=8

3. Sellers Price = Total price-tax = 3.5-0.25=3.25

Sellers revenue = 3.25*8 = 26

4. Without tax, sellers revenue = 3.4*9.2 = 31.28

Sellers revenue with tax = 3.25*8=26

So, lost in revenue = 31.28-26=5.28