Calculating equilibrium price and quantity
Suppose the market for widgets can be discussed by the subsequent equations:
Demand: P = 20-Q
Supply: P = Q-5
Where P is the equilibrium price in dollars per unit and Q is the quantity in thousands of units.
1. Illustrate what is the equilibrium price and quantity?
2. Suppose the government imposes a tax of $2)00 per unit to reduce widget consumption and raise government revenues. Illustrate what will the equilibrium quantity be? Illustrate what will the new equilibrium price be? Illustrate what determines the burden of taxation? Write the general formula for the burden of taxation?