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What is the shortage that results from price ceiling

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Reference no: EM131400824

Suppose that demand for good X is given by:QD = 20 -P, while supply is given by: QS = 2P-4.

a) Solve for the equilibrium price (P*) and quantity (Q*)

b) Suppose the government sets a price ceiling of $6. What is the shortage that results from this price ceiling?

c) Now suppose that, instead of a price ceiling, the government charges an excise tax of $3 per unit. Solve for the new equilibrium price and quantity after this tax is imposed, and the amount of revenue raised by the government.

Reference no: EM131400824

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