After imposing the tax, we get a consumer surplus of $72 and a producer surplus of $72. The total surplus we get is $144.
<h3>What is a Perfect Competitive Market?</h3>
A perfectly competitive market is a market in which many buyers and sellers are dealing with homogenous products, and the rate is decided by the demand and supply that exist in the market for the product.
Given
Demand Equation = 30-p
Supply Equation= -2+p
Tax=$4 per unit
Calculate Equlibrium for Price= Demand Equation=Supply Equation
= 30-p=-2+p
Equilibrium Price before tax=$16
Calculate Equlibrium for Quantity= 30-p
=30-16
Equilibrium Quantity before tax=14 units
Now After Imposing Tax Calculate Equilbrium
Supply Curve After Tax=-2+p
= -2 +(p-4)
= -6+p
Demand curve after tax=30-p
Equilibrium for Price after Tax= -6+p=30-p
Equilibrium for Price after Tax=$18
Equilibrium for Quantity after Tax= 30-p
=30-18
Equilibrium for Quantity after Tax =12 units
Consumer Surplus=1/2x(30-18)x(12-0)=1x12x12/2
= $72.
Producer Surplus=1x(18-6)(12-0)/2=1x12x12/2
=$72
Thus, after imposing an excise tax of $4, we get a total surplus of $144 including a consumer surplus and a producer surplus of $72 each.
Learn more about the Perfectly competitive market here:
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