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The demand and supply function for a commodity are P =100 - 2Q and P = 10 + Q, respectively. (a) Find the equilibrium price and quantity. (b) A new 10% tax is imposed on this commodity. Find the burden of the tax on demanders and the burden on suppliers. Also find the total taxes.
[In order to insure that we complete the problem in the same way, let's assume that the tax is imposed on the supply side of the market. In addition, the burden of the tax on demanders is the difference in price demanders pay when the tax is in existence less the price they paid when there was no tax. The burden on suppliers is the difference in price suppliers received when there was no tax and the net price (after remitting tax to the government) they receive when the tax is in existence.]
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