Scenario 10-3
​
Suppose the Equation for the Demand Curve $P$

question 128

Essay

Scenario 10-3
​
Suppose the equation for the demand curve in a market is P = 120 - (1/5) Q^D , where Q^D is the quantity demanded and $P$ is the price. Also, suppose the equation for the supply curve in the same market is P = (1/10) Q^S , where Q^S is the quantity supplied.
-Refer to Scenario 10-3. Suppose there is an external cost of $12 associated with the production of each unit of the good. What particular tax or subsidy would move the market to the social optimum?

---

Definitions:

Income Received

The total earnings obtained by an individual or entity, including wages, salaries, profits, rents, and other forms of financial gains.

Lowest Quintile

describes the bottom 20% segment of a population sorted by income or wealth, usually referenced in economic studies of inequality.

Income Received

The amount of money or monetary value received by an individual or entity in exchange for goods provided, services rendered or as a return on investments.

Middle Three Quintiles

The segments of the population that fall into the second, third, and fourth quintiles when dividing the total population into five equal groups based on income or wealth.