Question

If Pd = 100 - Qd and Ps = 0.25Qs
* determine the equilibrium quantity and price?
* Suppose the ad valorem tax of 10% is imposed on buyers of the wine,
graphically sketch the behavior of the demand and supply curves.
* what is the new equilibrium price and quantity?
* what is the price that buyers pay and supplies get ?
* Also determine the tax revenue and tax incidence on the buyers and sellers

Answer 1

$$Q_D=100-p$$

$$Q_S=4p$$

$$100-p=4p$$

$$p=20$$

$$Q=80$$

After tax:

$$100-p=3.6p$$

$$p=21.7$$

$$Q=78.3$$