Question

Demand for novels is given by Dp) = 60.0 - 1.0p , and the supply function is S(p) = 3.0p. Give all answers to one decimal. 2nd attempt Part 1 (1.3 points) See Hint What is the equilibrium price for novels? $ 15 What is the equilibrium quantity? 45 Part 2 (2 points) See Hint Suppose a $1 per-unit tax is imposed on buyers of novels. Find the equilibrium price buyers pay, the price sellers receive, and the quantity with the tax. Buyers pay $ Sellers receive $ novels are sold. Part 3 (0.7 point) See Hint Would the answer to Part 2 be different if the tax were charged to sellers instead of buyers? Choose one: • A. yes B. no C. not enough information to say

Answer 1

Part 1: $15; 45
At equilibrium, demand = supply.
So, 60 - p = 3p
So, 3p + p = 4p = 60
So, p = 60/4 = 15
Q = 60 - p = 60 - 15 = 45

Part 2: Buyers pay $15.75; Sellers receive $14.75; 44.25 novels are sold.
After tax, price paid by buyers = P + 1
So, D = 60 - (p + 1) = 60 - p - 1 = 59 - p
St equilibrium, new demand = supply.
So, 59 - p = 3p
So, p + 3p = 4p = 59
So, p = 59/4 = 14.75 (Price received by sellers)
Price paid by buyers = p + 1 = 14.75 + 1 = $15.75 (Price paid by buyers)
Q = 59 - p = 59 - 14.75 = 44.25

Part 3: B. no
(Answers are same if the tax is charged on either buyers or sellers.)