Question

The demand and supply functions of a good are given by

𝑃 = −25𝑄𝐷 + 200

𝑃 = 4𝑄𝑆 + 92

where 𝑃, 𝑄𝐷 and 𝑄𝑆 denote the price, quantity demanded and quantity supplied respectively.

(a) Sketch the graphs of these equations on the same system of axes. (6)

(b) Determine the equilibrium point algebraically. (5)

(c) If the government imposes of a fixed tax of 𝑅9 per good:

 (i) Write down the new supply function, hence graph it on the same system of axes in 

part (a). (6)

 (ii) Calculate the new equilibrium point after the imposition of tax. (5)

(d) Outline the distribution of tax. 

Answer 1

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