Verify the excess burden can also be calculated

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the supply of newspapers is perfectly elastic at a price of $0.75. sketch the supply and demand graph below and calculate the equilibrium number of newspapers demanded by consumers in this market assuming the quantity demanded is given by the function:

Qd=864000-512000P

suppose that a 20 percent tax is imposed on newspapers. show the effect of this tax in your graph (label the new supply line S`) and calculate the excess burden resulting from the tax. calculate the price elasticity of demand coefficient at the initial equilibrium point using the formula eD=|(*triangle*Qd/*triangle*P)(P/Qd)| (hint*triangle*Qd/*triangle*P is the slope of the demand equation) and use this value to verify that the excess burden can also be calculated using this formula EB=1/2ed(PQ)t2

Reference no: EM1358311

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