The demand for sausages is Q = 280 − 8P and the supply of sausages is...
The demand for sausages is Q = 280 − 8P and the supply of sausages is Q = 12P + 20. A per-sausage tax of $2 is levied on vendors. Calculate the after-tax price paid by consumers and the after-tax price received by sausage vendors. What would the price be without the tax?
Homework Answers
Answer)
Without tax price, D=S
280-8P = 12P+20
20P = 260
P=13(Without Tax Price)
Qd= 280-8(13) =176
Qs= 12(13) +20 = 176
After tax price,
Q= 280-8(P+2)
176 = 280-8P-16
8P=88
P=11(Price of buyers)
Q=12(P-2) +20
176=12P-24+20
12P = 180
P = 15(Price of sellers)
Tax is levied on vendors so producers have to bear greater prices and consumers will have to bear low prices.
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