--%>

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 : Describe inventory is sometimes thought

    Inventory is sometimes thought of as an essential evil. Describe. Inventory ties up funds and these are not earning an explicit return. Some inventory is frequently necessary, however, as companies attempt to hold the lowest acceptable amount.

  • Q : State Section 8.50 Section 8.50 : The

    Section 8.50: The Control Section of Budget Act gives the authority to raise federal funds expenses authority.

  • Q : Sizes of the MPC and MPS Normal 0 false

    Normal 0 false false

  • Q : Explain 3-year Expenditures and

    3-year Expenditures and Positions: The display at the beginning of each departmental budget which presents the different departmental programs by title, dollar totals, places, and source of funds for the past, current, and budget years.

  • Q : Present value influenced by change in

    Normal 0 false false

  • Q : Explain Appropriated Revenue

    Appropriated Revenue: The revenue which, as it is earned is reserved and appropriated for a particular aim. An illustration is student fees received by state colleges which are by law appropriated for the support of the colleges. The

  • Q : Fin 335 International finance 1. The

    1. The exchange rate is 1.22 Swiss francs per U.S. dollar. How many U.S. dollars are needed to purchase 1,500 Swiss francs? [$1,229.51] 2. You are planning an extended trip to Hong Kong. You have located some housing

  • Q : Define Reimbursements Reimbursements :

    Reimbursements: The amount received as a payment for the cost of services executed, or of other expenditures made for, or on behalf of, other entity (example, one department reimbursing the other for administrative work executed on its behalf). Reimbu

  • Q : Describe risks related with using

    Describe risks related with using a large amount of short-term financing for working capital? By using a large amount of short-term financing usually allows funds to be raised at a lower cost however raise the firm's risk.

  • Q : Define the term Surplus Define the term

    Define the term Surplus: It is an outdated term for a fund’s excess of assets (or resources) over liabilities.