Calculating quantity and equilibrium price

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Reference no: EM1312471

Suppose the market for widgets can be described by the following 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.

a. What is the equilibrium price and quantity?

b. Suppose the government imposes a tax of $2.00 per unit to reduce widget consumption and raise government revenues. What will the equilibrium quantity be? What will the new equilibrium price be? What determines the burden of taxation? Write the general formula for the burden of taxation?

Reference no: EM1312471

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