Problem
The market for a good is defined by the supply and demand equations as given below:
Qd = 300 - P
Qs = 2P
After a tax, T is levied, the new demand equation becomes:
Qd = 300 - (P+T)
Qs = 2P
1. What is the equilibrium price and quantity if tax T = 0, i.e. there is no tax?
2. Suppose T = $30, what can you say about the change in equilibrium (price and quantity) after a tax T is levied compared to the situation before tax? Calculate the tax revenue. Show your work.