How many guitars will be sold after the tax is imposed

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Reference no: EM13155191

Suppose you are hired by the Martin guitar company as an economic consultant. You estimate the demand for Martin guitars to be Q = 9,000 - 6P.

a) Suppose the supply of Martin Guitars is given by Q = -3000 +9P. What is the

equilibrium price and quantity of Martin guitars?

b) What is the price elasticity of demand at the equilibrium price and quantity?

c) What is the price elasticity of supply at the equilibrium price and quantity?

For the next three questions, suppose a per-unit excise tax of $90 per guitar is levied on the consumers.

d) What price will consumers pay after the tax is levied?

e) What proportion of the tax will be paid by the suppliers of Martin guitars?

f) How many guitars will be sold after the tax is imposed?

g) How much consumer surplus do consumers get after the tax?

h) What is the deadweight loss created by this tax?

Reference no: EM13155191

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