Answer to Question #181081 in Microeconomics for Saeed Mohamed

Question

If D=MB(Q) is P=100-5Q,S=MC(Q) is P=20+10Q.

(1)calculate Pe and Qe

(2)If Tax=20 On Seller, what is Cs Ps GS and DL.

(3)About GS,seller and Buyer which side take more Tax Burden

Please Draw graphs and answer.

 

Answer 1

(1) In equilibrium D = S, so:

100 - 5Q = 20 + 10Q,

15Q = 80,

Qe = 5.33 units,

Pe = 20 + 10×5.33 = 73.33.

(2) If Tax of 20 is put on Seller, then consumer, producer and total surpluses Cs, Ps, GS will decrease, and the deadweight loss DL will occur.

(3) As the supply cirve is steeper and less elastic, then the seller will take more of the Tax Burden.