Neco Model Questions Vol1 2020 Economics Question 2

Practice essay / theory question 2 from the 2020 Neco Model Questions Vol1 Economics examination. This question covers Demand and Supply, Tax Incidence, Equilibrium, Consumer Surplus .

Neco Model Questions Vol1 2020 Economics Essay / Theory

Topics: Demand and Supply Tax Incidence Equilibrium Consumer Surplus

Question 2 NECO_MODEL_QUESTIONS_VOL1 • 2020 • ECONOMICS • essay

The market for a locally produced widget is described by the following linear equations: Demand: Qd = 120 – 2P Supply: Qs = 20 + 3P where Q is quantity (in units) and P is price (in ₦). The government introduces a specific tax of ₦10 per unit on sellers. Answer the questions below.

Question Parts

( a )

Determine the initial equilibrium price and quantity before the tax is imposed.

( b )

After the tax, the supply curve shifts. Write the new supply equation, find the new equilibrium price paid by consumers and the equilibrium quantity.

( c )

Calculate the change in consumer surplus resulting from the tax. Show all steps and interpret the economic meaning of the result.

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About This Question

This is Neco Model Questions Vol1 2020 Economics Question 2. It is one of the essay questions from the 2020 Neco Model Questions Vol1 Economics examination.

The question covers Demand and Supply, Tax Incidence, Equilibrium, Consumer Surplus .

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