Question

In a small city, Uver, a new ride service, has become very popular with the younger generation. The inverse demand for Uver rides is given by p = 80.00 – where Q is the number of rides demanded and p is the market price per ride. The inverse supply of rides is given by p = 45.00 + Pose The local government in this small city is concerned that young people will walk less, which will have a negative effect on their health. The government is, therefore, considering charging Uver drivers a tax of $3.00 per ride.

Answer 1

The market demand is P=80-Yn and supply curve is P=45+? 12 Part 1 Equate the demand with supply to get the equilibrium prices Demand =supply 80-45 = tema 35=30+2 35x3=Q Q=105 P=80–105 = 80–8.75=1571.25 12 Part 2 Now, suppose that the government imposes a per unit tax of $3 which is paid by the buyers. This would shift the demand curve leftward. The tax per unit increases the price to buyer by $5 P+3=80– P=77 - 2 equate this equation with supply curve.

New Demand=Old supply 77- = 45+ 17-45- 32x3= 96 = P= 45+ 20 = 45+24 =169 Price paid by buyer is $72 (=69+3) Part 3 Price received by seller is $69