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

Consumption , . (40 points) Consider two consumers, A and B. A and B both w...

. (40 points) Consider two consumers, A and B. A and B both want perfect consumption smoothing (c = cf) and both have no current wealth. However, the two consumers have different i

Various control variables in the data set, From stock and Watson 3rd editio...

From stock and Watson 3rd edition introduction to econometrics Using the data set Teaching Ratings described, carry out the following exercises. a) Run a regression of Course

Why does an indifference curve never meet, No indifference curve can inters...

No indifference curve can intersect due to all points on indifference curve are ranked equally preferred and ranked or less more preferred than each other point on the curve.

Monetary policy vs. fiscal policy, Monetary Policy Vs. Fiscal Policy Ac...

Monetary Policy Vs. Fiscal Policy According to monetarists, money is very important in determining the level of aggregate demand and that monetary policy is very potent. In con

Montary policy, Examine the efficiency of quanttitative credit control inst...

Examine the efficiency of quanttitative credit control instrument

Natural resources are being rapidly depleted, Assume that there are only tw...

Assume that there are only two inputs (labor and natural resources) producing two goods (movies and gasoline) with no improvement in society's technology over time. Further, assume

Average monthly total revenue from the sale, The Stop decay company sells a...

The Stop decay company sells an electric toothbrush for $25. Its sales have averaged 8,000 units per month over the past year. Recently, its closest competitor, Decay fighter, redu

Calculate the duration of a par value bond with coupon rate, 1.  Calculate ...

1.  Calculate the duration of a par value bond with a coupon rate of 8% and a remaining time to maturity of 5 years. 2. On September 26, the spot price of gold was $320 per ounc

Classical quantity theories, Classical Quantity Theories Quantity theor...

Classical Quantity Theories Quantity theories have had a long history and a widespread use in economics. As originally formulated these were not explicitly designed as theories

Mutual funds into stock also funds from money market, How would the followi...

How would the following influence the growth rates of theM1 and M2 money supply figures over time? a. an increase in the quantity of U.S. currency held overseas b. a shift of f

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