Assume the following linear demand and supply functions of a good respectively, Q=20-P and Q=-2+P, where Q is the quantity and P is the price. Assume that there is a two-dollar unit tax on buyers a.     What is the market price and quantity of the good after the consumption tax? Calculate the consumer and producer surplus after the tax. ? b. What is the deadweight loss because of the tax ?

Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter5: Elasticity Of Demand And Supply
Section5.A: Appendix: Price Elasticity And Tax Incidence
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  1. Assume the following linear demand and supply functions of a good respectively, Q=20-P and Q=-2+P, where Q is the quantity and P is the price. Assume that there is a two-dollar unit tax on buyers

a.     What is the market price and quantity of the good after the consumption tax? Calculate the consumer and producer surplus after the tax. ?

b. What is the deadweight loss because of the tax ?

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