What is amount of deadweight weight loss

Reference no: EM13180437

Suppose you are given Qs=2P and Qd=120-P

a) What is equilibrium price and quantity? show the results in graph (plot P in the vertical axis, and q is horizontal axis)

b) Suppose per unit tax, T is imposed on buyers. Then what is the equilibrium quantity and equilibrium price? Now, assume T=30, then what will be equilibrium price and quantity. (Hint: use P is the price producer receives, and P+T is price paid by the buyer).

c) If tax is imposed on seller what will be the equilibrium (here P is the price paid by the buyer and (P-T) is the price received by the seller). If T=30, show that the price received by seller is same in b) and c ) and the price paid by the buyer are same in both b and c.

d) What is amount of Deadweight Weight Loss (DWL)?

e) If tax is doubled from $30 per unit to $60 dollar per unit, what will be the DWL? Do you think DWL will be just double now?

Reference no: EM13180437

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