How much consumer surplus exists in market

Assignment Help Business Economics
Reference no: EM132649225

Suppose you are an aide to a U.S. senator who is concerned about the impact of a recently proposed sales tax on the welfare of her constituents. You explained to the senator that one way of measuring the impact on her constituents is to determine how the tax change affects the level of consumer surplus enjoyed by the constituents. Based on your arguments, you are given the go-ahead to conduct a formal analysis, and you obtain the following estimates of demand and supply: QD = 500 - 5P and QS = 2P - 60.

(a) Rewrite both equations in the form P = f(Q), P as the left had side variable and Q as the right hand side variable.

(b) What are the equilibrium quantity and equilibrium price?

(c) How much consumer surplus exists in this market? Please show your calculations.

(d) If a $2 sales tax is levied on this good, what will happen to the equilibrium price and quantity? The demand curve is unchanged, and the new supply curve is QS = 2P - 64.

(e) What will the consumer surplus be after the tax? Please show your calculations.

Reference no: EM132649225

Questions Cloud

Emergency management : The issue is that there is sudden flooding that requiring emergency management to select between saving a nursing home
Equilibrium price of pens and the quantity exchanged : Consider the market for two goods that are substitutes, such as pens and pencils. Assume that a technological breakthrough reduced the cost of producing pens.
What is lynns responsibility : What is Lynn's responsibility as it relates to the statement being made by Geoff's telemarketers - Which of the following procedures would maintain
How much Orion should recognize compensation expense : The Black-Scholes option pricing model determined total compensation expense to be $220,000. How much Orion should recognize compensation expense
How much consumer surplus exists in market : Rewrite both equations in the form P = f(Q), P as the left had side variable and Q as the right hand side variable.
Describe your experience in researching the agency : Describe your experience in researching the agency and interviewing representatives, highlighting the value the project has to your career, t
Calculate the percent change in demand for minimum wage : Based on your findings, how many additional workers do you think will file unemployment claims in your state? Please explain and show your calculations.
Describe knowledge and understanding of suburbanization : Describe knowledge and understanding of suburbanization and central city decline after WWII
Discuss the inaccuracies portrayed : Discuss the inaccuracies portrayed. Next, discuss the audience this show is targeted towards and the importance of proper health communication messaging.

Reviews

Write a Review

Business Economics Questions & Answers

  Compile this task as per the assignment requirements

Provide a query for The Sales Manager asks you to provide the average Pretax Sales amount throughout the years.

  What is the growth rate of output per worker before change

In the Solow model with technological progress, consider an economy that begins in steady state with a rate of technological progress, g, of 2%. Suppose that g rises permanently to 3%. Assume α = 1/3. What is the growth rate of output per worker befo..

  Use the theory of ethical relativism

Use the theory of ethical relativism and the Center for American Progress report to consider the recent bans on foreign law. Propose two (2) advantages and two (2) disadvantages of using foreign or international law in legal disputes. Provide a ratio..

  Foreign-currency denominated financial asset

In the last year, China’s economic growth has slowed substantially, but is still faster than that of the U.S. or Europe. Based on this information, what impact has that had on China’s currency?  “For an investment in a foreign-currency denominated fi..

  Discuss the prevalence of asymmetric information

Discuss the prevalence of asymmetric information in insurance contracts, in lending, in investment.

  Fact that the slope of the production possibilities

The fact that the slope of the production possibilities curve becomes steeper as we move down along the curve indicates what?

  Write down jon budget constraint

Suppose that jon only consumer two goods X and Y .the price of X is $2 and the price of Y is $4 jon has $40 to spend. Write down jon budget constraint. Draw a graph of the budget constraint.Be sure label the maximum quantity of X and the maxium quant..

  Determine if a number is prime

A positive whole number, n > 2, is prime if no number between 2 and the square root of (inclusive) evenly divides n.  Write a program that accepts a value of n as input, and determines if the value is prime.  If n is no prime, your program should ..

  Live in an economy that has a population

tate in words and show with a graph the effect of the following events on equilibrium price and quantity of the market given. Assume you live in an economy that has a population of 2,000,000 people over the age of 16. The labor force in your economy ..

  Reduce the budget deficit

As part of his plan to reduce the budget deficit, President Clinton proposed raising the excise tax on gasoline by 50 cents per gallon. While passage of this proposal was blocked by Congress, what would have happened to the sales of gasoline if the p..

  Recommend a course of action for shaun

(a) Based on these facts, recommend a course of action for Shaun.

  Which pricing scheme maximizes total welfare

A public water utility is comparing two separate pricing schemes: (i) a two-tiered pricing scheme where the first 5,000 gallons cost $20 and all subsequent gallons cost $10 or (ii) a single price of $15 per gallon. Under scheme (i), how much water is..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd