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svlad2 [7]
3 years ago
12

The demand and supply curves are given by q=110−2p and q=3p−50, respectively; the equilibrium price is $32 and the equilibrium q

uantity is 46 units. A sales tax of 7% is imposed on the consumer. (a) Find the equation of the new demand and supply curves. Enter the exact answer. Demand: q= Supply: q= (b) Find the new equilibrium price and quantity. Round your answers to two decimal places. p=$ Number q= Number units
Business
1 answer:
DaniilM [7]3 years ago
4 0

Answer:

  1. The Demand is given by q^d=110-2p^d(1.07)
  2. The supply curve is by q^s=3p^s-50

Consumers will face a price of 33.29 and the equilibrium quantity will be 43.42.

These results illustrate that as a consequence of the tax, the price faced by consumers will be higher, quantity sold be lower, and producers will receive less for their product sale.

Explanation:

  1. The Demand is given by q^d=110-2p^d
  2. The supply curve is by q^s=3p^s-50

In the absence of taxes p^s=p^d and q^s=q^d.

An ad-valorem tax t=0.07 generates now that

p^s=p^d(1+t)

So the new equilibrium is

110-2p(1.07)=3p-50

110+50=5.14p

p^s=31.12

p^d=33.29

Replacing in the demand equation we get the equilibrium quantity

q=43.42

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