The market for a certain product is described by the linear demand equation $Q_d = 1000 - 5P$ and the linear supply equation $Q_s = -200 + 3P$, where $P$ is the price in dollars and $Q$ is quantity. The government imposes a specific tax of \$20 per unit on producers.

Calculate the new equilibrium price paid by consumers, the price received by producers after the tax, the equilibrium quantity, and the total tax revenue collected.

Question

The market for a certain product is described by the linear demand equation $Q_d = 1000 - 5P$ and the linear supply equation $Q_s = -200 + 3P$, where $P$ is the price in dollars and $Q$ is quantity. The government imposes a specific tax of \$20 per unit on producers.

Calculate the new equilibrium price paid by consumers, the price received by producers after the tax, the equilibrium quantity, and the total tax revenue collected.

Accepted Answer

Consumer price = $157.5; producer price = $137.5; quantity = 212.5; tax revenue = $4,250

Gce Model Questions Vol1 2018 Economics Question 8

Answer Options

About This Question

Master the Exam!