Question

Suppose the market for widgets can be described by the following equations: Demand: P = 20 - 1.000 Supply: P = 1.000 -6, where P is the price in dollars per unit and Q is the quantity in thousands of units. What is the equilibrium price and quantity? The equilibrium quantity is thousand units and the equilibrium price is $(Enter your responses rounded to two decimal places.) Suppose the government imposes a tax of $1 per unit to reduce widget consumption and raise government revenues. What will be the new equilibrium quantity? What price will the buyer pay? What amount per unit will the seller receive? The new equilibrium quantity will be thousand units. (Enter your response rounded to two decimal places.) The price paid by buyers will be $. (Enter your response rounded to two decimal places.) The amount kept by sellers will be $. (Enter your response rounded to two decimal places.) Suppose the government has a change of heart about the importance of widgets to the happiness of the American public. The tax is removed and a subsidy of $1 per unit is granted to widget producers. What will the equilibrium quantity be? What price will the buyer pay? What amount per unit (including the subsidy) will the seller receive? What will be the total cost to the government? (Enter your responses rounded to two decimal places.) The new equilibrium quantity will be thousand units. The price paid by buyers will be $

Answer 1

Of=Os 4 Pruie = 13-6=7 P- 20-0 p=10-6 do-0=0-6 20=260=13 Egenoty = 13 thousand tax of & I then PB - Pst1=200P = 19-0. - 0-6 Again 1900-0-6 10-21-125 4 PB- 7.5 4 Ps= 6.5 Newego ory Newer 12.5 Chausand) IP6= 7.5 4 l'es=6.5 After $1 of subsidy (SPB+1 -0.6 PB-Zord Agar Zord=0-7 PB=Q-7 Now = 13.5 PB- 6.5 4 l = 7.5 to and cost of the gout I 13.5thousad