Question

Suppose Suzuki has the following demand and supply function for Cultus VXL:

 

Q^d = 55 - 5P                           Q^s = -50 + 10P

 

After the government decided to impose tax on the production of Cultus VXL, the new supply function:

 

Q^s = -60 + 10P

i)                  Find out the equilibrium price and quantity before tax.                          

ii)                Find consumer and producer surplus before tax.                                    

iii) Determine government revenue and dead weight loss after tax.  

Answer 1

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