--%>
Assignment Help - homework help

Question based on imposesing tax

Given equations describe market for widgets

                        Demand: P = 10 - Q Supply: P = Q - 4

Here P denotes the price in dollars per unit and Q denote to the quantity in thousands of units. Assume the government imposes a tax of $1 per unit to decrease widget consumption and raise government revenues. Determine new equilibrium quantity be? What price will the buyer pay? What amount per unit will the seller receive?

Along with the imposition of a $1.00 tax per unit, the demand curve for widgets shifts inward. At each price, the consumer desire to buy less. Algebraically, the new demand function is:
                                       P = 9 - Q.
The new equilibrium quantity is found in the same way as in (2a):
                                  9 - Q = Q - 4, or Q* = 6.5.
To find out the price the buyer pays, PB* , substitute Q* into the demand equation:
                                  PB* = 10 - 6.5 = $3.50.
To find out the price the seller receives, Ps* , substitute Q* into the supply equation:
                                  Ps* = 6.5 - 4 = $2.50.

   Related Questions in Finance Basics

  • Q : Association of net present value to

    Normal 0 false false

    		•
  • Q : Recognizes and state the significance

    Normal 0 false false

  • Q : Advantages of finger prints biometric

    Advantages of finger prints biometric technique: Easy to use and very little training is used No space is required for the installation Large amounts of existing data to allow background list check Has proven effect

    		•
  • Q : Problem on banks Customers arrive at a

    Customers arrive at a bank with 2 tellers. The manager took the following data for 11 customers during a busy time. The manager has asked you to:(a) Create an event log. (b) Calculat

    		•
  • Q : What is Legislative Analysts Office

    Legislative Analyst’s Office (LAO): A non-partisan organization which gives advice to the Legislature on the fiscal and policy matters. For illustration, the LAO annually publishes a full analysis of the Governor's Budget and this document becom

    		•
  • Q : Effect of bank charges discount

    What happens while a bank charges discount interest on a loan? While a bank charges discount interest on a loan the required interest payment is subtracted through the loan proceeds at the time the loan is made. It makes the effective interest

    		•
  • Q : Companies benefit most from stronger

    What type of U.S. companies would benefit most from a stronger dollar in the foreign exchange market? Describe. U.S. companies which import goods from other countries would benefit from a stronger dollar. More units of foreign currency could b

    		•
  • Q : What are Governmental Cost Funds

    Governmental Cost Funds: For lawful basis accounting and budgeting aims, funds which derive revenue from the taxes, licenses, and fees.

    		•
  • Q : Define Planning Estimate Line Planning

    Planning Estimate Line: The separate planning estimate adjustment or entry for a specific expenditure or type.

    		•
  • Q : Lower for a specified company-the cost

    Normal 0 false false