Calculating impact of a tax - numerical
Assume a linear demand function of the form:
Qd = 80 - 5P
and a linear supply curve of the form:
Qs = -10 + 5P
Using these demand and supply functions, answer the following questions.
Question 1
Calculate the quantities demanded and supplied for prices from $1 - $15.
Question 2
Plot these figures to give the demand and supply curves for the product.
Question 3
Using simultaneous equations, calculate the equilibrium price and output.
Question 4
If the government imposes a specific tax per unit of $4, plot the new supply curve on the original supply and demand diagram. Use the diagram to find out the new equilibrium price and quantity.
Question 5
Calculate the tax revenue received by the government.
Question 6
Calculate the revenue received by the firms:
- before the tax
- after the tax
Question 7
Calculate consumer expenditure:
- before the tax
- after the tax