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A per-unit tax of 200 is imposed on suppliers of computers

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The elasticity of demand for home computers is -2.5, the elasticity of demand for business computers is -.90, and the elasticity of supply for computers for both purposes is 1.

a. A per-unit tax of $200 is imposed on the suppliers of computers. How much does the gross price increase in each market?

b. Suppose the untaxed market equilibrium price and quantity in the home computer market are $850 and 10 million, respectively. In the business market, the untaxed market equilibrium price and quantity are $1200 and 15 million, respectively. What is the deadweight loss of the $200 tax?

Reference no: EM13389032

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