Estimating the equilibrium price and equilibrium quantity

Assignment Help International Economics

Reference no: EM1376383

Assume that the market is explained through the following supply and demand equations:
QS =2P,
QD =300-P.

(a) Determine the equilibrium price and the equilibrium quantity.
(b) Suppose that a tax of T is placed on buyers, so the new demand equation is QD = 300 - (P + T ). Solve for the new equilibrium. What happens to the price received by sellers, the price paid by buyers, and the quantity sold? Explain.
(c) Tax revenue is T · Q. Use your answer to part (b) to solve for tax revenue as a function of T . Graph this relationship for T between 0 and 300. Explain.
(d) Solve for deadweight loss as a function of T . Graph this relationship for T between 0 and 300. Explain.
(e) Use your results in (c) and (d) to plot the dead weight loss as a function of tax revenue.
(f) If the government doubles the tax on gasoline, can you be sure that revenue from the gasoline tax will rise? Can you be sure that the deadweight loss from the gasoline tax will rise? Explain.

Reference no: EM1376383

Questions Cloud

Concepts of price elasticities : Groupon is a popular group purchasing and daily deals website. In a current promotion, a local restaurant to sold buffet vouchers at a step discount on Groupon's website.

Discuss major cross cultural differences : Big businesses and small businesses now compete in a truly global economy. To be successful in another nation it is essential to understand and appreciate the cultural differences that exist.

Analyze the stages of market development : Create a written analysis of potential chances and threats based on your understanding of economic and trade summary in each of your two selected markets.

Find new equilibrium interest rate and level of income : Assume that the government buys are increased from 100 to 150. How much does the IS curve shift? What are the new equilibrium interest rate and level of income? Describe it.

Estimating the equilibrium price and equilibrium quantity : Assume that the market is explained through the following supply and demand equations, Determine the equilibrium price and the equilibrium quantity.

Swiss membership in the european union : The European Union is a supranational management that has been capable to overcome tremendous national diversity consider of how different Germany, UK, Italy, Spain etc...

Evaluating the results of regression : Gold Trackers watching the value of precious metals and has daily information on prices and sales of gold for the last many years.

Determine the expected signs of the various coefficients : Determine the expected signs of the various coefficients and explain your reasoning.

Find the marginal propensity to consume : According to the United States informationfor 1965-IQ to 1983-IQ (n=76), James and Adibi obtained the folowwing regression to explain personal consumption expenditure in the United States

User Account

All Pages