Reference no: EM13124056
In the market of haircuts, the demand function is P=100-0.5Qd, and the supply function is P=10+Qs, where Q represents thousands of haircuts per month. Use these functions to obtain:
a) The equilibrium price and quantity in he market
b) the consumer surplus and the producer surplus
c) If tax of $30 per haircut is imposed on consumers, find the new equilibrium price and quantity
d) calculate the new consumer and producer surpluses after thetas has been applied
e) compute teetotal amount of revenue collected with the tax, and the deadweight loss created by the tax
f) what is the economic incidence of the tax?
(how much revenue is going to be paid by consumers and producersg)
the government is studying a proposal to replace the previous tax on consumers with a tax o $60 per haircut on suppliers. it has been estimated that collecting the tax from suppliers will reduce the costs of administering the tax by $100 thousand dollars.
Compare the gains in additional revenues and lower administration costs with the new deadweight loses created by the tax, and decide whether the new proposal should be implemented or not.
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