Answer to Question #167702 in Microeconomics for talha

Question

The demand and supply functions for three (03) goods are given as follows:

D_x = 100-3P_x+P_y+3P_z

D_y = 80+P_x-2P_y-P_z

D_z = 120+3P_x-P_y-4P_z

S_x = -10+P_x

S_y = -20+3P_y

S_z = -30+2P_z

1. determineThe equilibrium prices and quantities of all three goods are?
2. The government decides to:

• Impose a 25% Tax on X?
• Impose a 5 Rs /unit Tax on Y?
• Give a 10% subsidy on good z?

1. Analyze the impact of each of these policies separately on equilibrium prices and quantities?
2. Also calculate changes in consumer and producer surpluses, and amount of revenue earned by the government?
3. Repeat this exercise when policies (a, b), (b, c) and (a, b, c) are jointly implemented. Which policy choice is best? Why?
4. Provide theoretical justification (using diagrams) of all results obtained?

Answer 1

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