Question: The supply and demand function in the market have the following form: P-30-Q and P-20 The price a…

01 May Question: The supply and demand function in the market have the following form: P-30-Q and P-20 The price a…

Posted at 00:13h in 2Past Paper by Exams

The supply and demand function in the market have the following form: P-30-Q and P-20 The price and quantity in equilibrium will now be P-20S and Q-10 units. Now assume that firms must pay a tax of 3S per every unit that they sell (use two decimals if needed) a) Draw the situation in the graph. Which of the curves will shift due to the tax? (1) b) What is the new quantity supplied in the market? At what price? (2p) c) If the calculations are done correctly, you will have found that the tax is partly paid by consumers and partly by producers. How much of the tax do consumers pay and how much do producers pay? (2p)

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