Derive bert demand schedule

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Reference no: EM13854943

Problem 1: It is hot day, and Bert is very thirsty. Here is the value he places on a bottle of water:

Value of first bottle

$7

Value of second bottle

5

Value of third bottle

3

Value of fourth bottle

1

a. From this information, derive Bert's demand schedule. Graph his demand curve for bottled water.

b. If the price of a bottle of water is $4, how many bottles does Bert buy? How much consumer surplus does Bert get from his purchases? Show Bert's consumer surplus in your graph.

c. If the price falls to $2, how does quantity demanded change? How does Bert's consumer surplus change? Show these changes in your graph.

Problem 2: How do the elasticities of supply and demand affect the deadweight loss of a tax? Why do they have this effect?

Problem 3: What happens to the deadweight loss and tax revenue when a tax is increased?

Problem 4: What do you mean by tax incidence? What determines the tax incidence, Illustrate with the help of diagram?

Reference no: EM13854943

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