Suppose the Market for Soda Is Represented by the Supply

question 120

Essay

Suppose the market for soda is represented by the supply and demand equations:
Q^S = 35P - 39.75 and Q^D = 10.25 - 5P, where P is price per bottle and Q measures bottles per second.
a. What are the values of consumer and producer surplus?
b. If the government imposes a $0.50 tax per bottle, what are the values of consumer and producer surplus?
c. What is the deadweight loss from the tax? How much revenue does the tax yield?

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