Using algebra find the equilibrium price, Macroeconomics

Assignment Help:

The demand equation for champagne is given by P = 10 - Q. The supply schedule for champagne is given by P = Q. Note that P denotes price per bottle in dollars, and Q is quantity measured in thousands per week.

 a. Use algebra to find the equilibrium price of champagne, the equilibrium quantity traded, and the total revenue of champagne makers.

 b. Now suppose the government imposes a per unit tax on champagne of $2 per bottle. That is, each time champagne producers sell a bottle of champagne they have to pay the government a tax of $2. What is the new supply equation with the tax?

 c. What is the new equilibrium price and quantity with the tax?

 d. How much of the $2 tax is paid by the consumers? How much of the $2 tax is paid by the producers?

 e. Show the effect of the tax in a diagram by graphing the original demand and supply equations and then drawing in the supply equation after the tax into the same diagram. Indicate the equilibrium price and quantity before and after the tax. Also indicate the net price per bottle after the tax (i.e. the price received by the producers once they have paid the tax).

 f. Use the diagram to calculate the deadweight loss from the tax.

 g. How much revenue does the government raise from the tax? 

 

 


Related Discussions:- Using algebra find the equilibrium price

Define elasticity of supply, Define elasticity of supply. What factors infl...

Define elasticity of supply. What factors influence Elasticity of Supply? There is only one type of identifiable elasticity of supply measuring the responsiveness of market sup

Increases in the price of gasoline over the past few years, How have you re...

How have you responded to increases in the price of gasoline over the past few years? How would you respond if the price of gasoline doubled over the next two years? What alternati

Principle of opportunity cost applies to your life, Give an example of how ...

Give an example of how the Principle of Opportunity Cost applies to your life. Think of a recent decision you made. It could be a decision as simple as whether to eat out or cook y

Choice amonga lottery, You have a choice between a lottery lump sum payout ...

You have a choice between a lottery lump sum payout of $10,000,000 today or a series of 25 annual annunity payments the first payment will be one year from today ad a discount rate

Describe the economic justification for free trade policies, Some manufactu...

Some manufacturing and agricultural products produced in the Midwest are exported to overseas markets.  US consumers and businesses also purchase many products produced outside the

Gkx industries expects sales of its hydraulic seals, GKX Industries expects...

GKX Industries expects sales of its hydraulic seals (in inch and metric sizes) to increase according to the cash flow sequence $70+4k, where k is in years and cash flow is in $1000

What are the production elasticities of demand, The following Cobb-Douglas ...

The following Cobb-Douglas production function is used to describe the output generated by a local government maintenance agency. Q = αL β1 K β2 E β3 Where L represents numb

Kinked demand curve, disuss with an aid of a diagram the kinked demand cur...

disuss with an aid of a diagram the kinked demand curve

Seek the kingdom of god, What does it mean to seek the Kingdom of God in a ...

What does it mean to seek the Kingdom of God in a democratic capitalist economy? How can it be done?

Write Your Message!

Captcha
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