Suppose you are hired by the Martin guitar company as an economic consultant. You estimate the demand for Martin guitars to be Q = 9,000 - 6P.
Suppose the supply of Martin Guitars is given by Q = -3000 +9P. What is the equilibrium price and quantity of Martin guitars?
For the next three questions, suppose a per-unit excise tax of $90 per guitar is levied on the consumers.
What price will consumers pay after the tax is levied?
What proportion of the tax will be paid by the suppliers of Martin guitars?
How many guitars will be sold after the tax is imposed?
How much consumer surplus do consumers get after the tax?
What is the deadweight loss created by this tax?