Calculate the equilibrium price and quantity
6. Given the following lwo equations: P=8-0.05Q
P=0.85+0.0125Q
(a) Calculate the equilibrium price and quantity.
(b) Calculate the price elasticity of demand at the equilibrium price and quantity. ts
the demand elas(ic at this point?
(c) Calculate the price elasticity of supply at the equilibrium price and quantity. ls the
supply elastic at this point?
(d) Suppose a tax of RM0.35 per unit of output is levied on this good and the
producers are required to collect the tax. Calculate the new equilibrium price and
quantity in the market. Calculate the per cent of the tax that is shifted to the
consumer and the per cent that is borne by the producer.r’
(e) Sketch the pre-tax and post-tax equilibria on a diagram showing the demand and
supply curves, the prices paid by the consumer, the prices received by the
producer, and the tax.
