Question

Statement 1 is a function of demand and supply for goods A.

P = 80 – 2Q
P = 20 + 2Q




i. Find an equilibrium price (RM) and quantity (unit).
ii. Now supplier must pay a tax of RM6 per unit. Find new equilibrium price and quantity.
iii. Draw a graph that shows demand and supply curve before and after taxes.
iv. Calculate the amount of tax passed by consumers.
v. Who have do absorb most of the tax burden?

Answer 1

i

$Qd=Qs\\80-2Q=20+2Q\\80-20=2Q+2Q\\60=4Q\\Q=15\\P=50$

ii

$Qd=Qs\\80-2Q=20+2Q+6\\80-26=2Q+2Q\\54=4Q\\Q=13.5\\P=53$

iii

iv

$(50×15)-(13.5×53)=34.5$

v. Consumer suffer from the tax burden