Solve the market equilibrium and tax revenue

Solve the market equilibrium and tax revenue

Business Economics
The supply and demand curves are: Qs = – 800 + 15p and Qd = 3200 – 25p

(a) Solve for the market equilibrium.

(b) Now suppose a tax of $20 per unit is imposed on consumers. What are the new equilibrium quantity, buyer’s price and seller’s price? What is tax revenue? Graph your answer.

(c) Calculate the losses in consumer surplus and producer surplus separately. What is the deadweight loss from the tax?

(d) Explain how the price changes for buyers and sellers relate to the supply and demand elasticities.

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