The demand for football tickets is Q = 360 − 10P and the supply of football...
The demand for football tickets is Q = 360 − 10P and the supply of football tickets is Q = 20P. Calculate the gross price paid by consumers after a per-ticket tax of $2. Calculate the after-tax price received by ticket sellers.
Homework Answers
Answer
Converting the supply curve to inverse supply curve to add the tax
Q=20P
20P=Q
P=0.05Q
adding tax
P=0.05Q+2
converting back
P=0.05Q+2
0.05Q=P-2
Q=20P-40
the equilibrium is at
after-tax supply equal to the demand
20P-40=360-10P
30P=400
P=13.3333333=13.33=the gross price paid by consumers after a per-ticket tax
the after-tax price received by ticket sellers=P-per unit tax =13.33-2=11.33
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