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Get Full Access to Principles Of Macroeconomics - 6 Edition - Chapter 8 - Problem 11
Get Full Access to Principles Of Macroeconomics - 6 Edition - Chapter 8 - Problem 11

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# Suppose that a market is described by thefollowing supply and demand equations:QS 2PQD

ISBN: 9780538453066 473

## Solution for problem 11 Chapter 8

Principles of Macroeconomics | 6th Edition

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Problem 11

Suppose that a market is described by thefollowing supply and demand equations:QS 2PQD 300 Pa. Solve for the equilibrium price and theequilibrium quantity.b. Suppose that a tax of T is placed on buyers,so the new demand equation isQD 300 (P T).Solve for the new equilibrium. What happensto the price received by sellers, the price paidby buyers, and the quantity sold?c. Tax revenue is T Q. Use your answer topart (b) to solve for tax revenue as a functionof T. Graph this relationship for T between 0and 300.d. The deadweight loss of a tax is the area ofthe triangle between the supply and demandcurves. Recalling that the area of a triangleis 12 base height, solve for deadweightloss as a function of T. Graph this relationshipfor T between 0 and 300. (Hint: Lookingsideways, the base of the deadweight losstriangle is T, and the height is the differencebetween the quantity sold with the tax andthe quantity sold without the tax.)e. The government now levies a tax on thisgood of \$200 per unit. Is this a good policy?Why or why not? Can you propose a betterpolicy?Fo

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##### ISBN: 9780538453066

This textbook survival guide was created for the textbook: Principles of Macroeconomics, edition: 6. The answer to “Suppose that a market is described by thefollowing supply and demand equations:QS 2PQD 300 Pa. Solve for the equilibrium price and theequilibrium quantity.b. Suppose that a tax of T is placed on buyers,so the new demand equation isQD 300 (P T).Solve for the new equilibrium. What happensto the price received by sellers, the price paidby buyers, and the quantity sold?c. Tax revenue is T Q. Use your answer topart (b) to solve for tax revenue as a functionof T. Graph this relationship for T between 0and 300.d. The deadweight loss of a tax is the area ofthe triangle between the supply and demandcurves. Recalling that the area of a triangleis 12 base height, solve for deadweightloss as a function of T. Graph this relationshipfor T between 0 and 300. (Hint: Lookingsideways, the base of the deadweight losstriangle is T, and the height is the differencebetween the quantity sold with the tax andthe quantity sold without the tax.)e. The government now levies a tax on thisgood of \$200 per unit. Is this a good policy?Why or why not? Can you propose a betterpolicy?Fo” is broken down into a number of easy to follow steps, and 182 words. This full solution covers the following key subjects: . This expansive textbook survival guide covers 23 chapters, and 267 solutions. Principles of Macroeconomics was written by and is associated to the ISBN: 9780538453066. Since the solution to 11 from 8 chapter was answered, more than 247 students have viewed the full step-by-step answer. The full step-by-step solution to problem: 11 from chapter: 8 was answered by , our top Business solution expert on 03/16/18, 04:28PM.

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