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Value of the deadweight loss in the market

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Reference no: EM132461087

The market for a particular good is described by the following demand and supply equations respectively: QD = 448 - 3.5P and QS = 2.5P - 80. Consider that after much discussion among policymakers and following a final vote, the government implements a 20% ad valorem tax on sellers of the good. The market adjusts and is currently in equilibrium.

a) After the tax is implemented, what quantity of the good is traded? What price do buyers pay and what price do sellers receive?

b) After the tax is implemented, what is the value of the deadweight loss in the market?

c) After the tax is implemented, what is the tax revenue from this market?

d) After the tax is implemented, do consumers or producers face any tax burden? If so, then state who faces a higher burden, and what this implies about the group's price elasticity relative to the other group's price elasticity. If not, then state that they do not face any tax burden, that the value of the burden is zero, and what this implies about the group's price elasticity relative to the other group's price elasticity.

Reference no: EM132461087

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