--%>

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 : What do you mean by Without Regard To

    What do you mean by Without Regard To Fiscal Year (WRTFY): Where an appropriation has no period of restriction on its accessibility.

  • Q : Explain Administration Program Costs

    Administration Program Costs: It is the indirect cost of a program, usually a share of the costs of the administrative units serving the whole department (example, the Director's Office, Personnel, Legal, Accounting, and Business Serv

  • Q : Define Fund Balance Fund Balance : For

    Fund Balance: For accounting aims, the excess of a fund’s assets over its liabilities. And for budgeting aims, the surplus of a fund’s resources over its expenses.

  • Q : What are Salaries and Wages Supplement

    Salaries and Wages Supplement: The annual publication issued in a while after the Governor's Budget, including a summary of all positions by department, unit, and categorization for the past, present, and budget years, as of July 1 of the present year

  • Q : What is Cash Flow Statement What is

    What is Cash Flow Statement: It is a statement of cash receipts and disbursements for a particular time period.

  • Q : Are there security and soundness

    Are there security & soundness implications of mergers?No. All mergers needs regulatory approval and are subject to intense examination through regulators. If anything, the influence on safety and soundness is in general positive, as mergers

  • Q : Define the term Program Cost Accounting

    Program Cost Accounting (PCA): The level of accounting which identifies costs by activities executed in achievement of a purpose in contrast to the traditional line-item format. The aim of accounting at this level is to generate cost data adequately a

  • Q : State Schedule 11 Schedule 11 : It is

    Schedule 11: It is the outdated word for “Supplementary Schedule of Operating Expenses and Equipment.”

  • Q : What do you mean by the term Year of

    Year of Appropriation (YOA): It refers to the initial year of an appropriation.

  • Q : Problem on tax and spend at possible

    Normal 0 false false