A bakery in a small town has a supply curve for custom cakes
that is given by the equation 
The bakery faces a weekly demand curve for cakes given
by 
where price is measured in dollars and quantity is measured per
cake.
a) Plot the supply and demand curves on a scale diagram.
b) What is the equilibrium market price the bakery will charge and how many cakes will consumers buy?
c) How much is the consumer surplus?
d) What is the bakery’s revenue?
e) Suppose the government added a tax of $3 per cake. How many cakes will consumers now buy and how much will they pay?
Homework Answers
a) 
b)hence the equilibrium market
price is $20 and the consumer will buy 75 cakes
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