The Market for Cigars Is Characterized by Q^D = 10

question 102

Essay

The market for cigars is characterized by Q^D = 10 - 0.25P and Q^S = 0.15P, where P is price per box of cigars and Q measures boxes per hour.
a. What is the equilibrium price of cigars?
b. Suppose the government taxes sellers $5 per box. What are the after-tax prices that buyers pay and sellers receive?
c. Suppose the government taxes buyers rather than sellers $5 per box. What are the after-tax prices that buyers pay and sellers receive?

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Definitions:

Periodic Tenancy

A lease interest in land for an indefinite period involving payment of rent at fixed intervals, such as week to week, month to month, or year to year.

Specify

To state or describe something clearly and precisely.

Revoke

To officially cancel, withdraw, or annul a decision, order, or agreement.

Impunity

Exemption from punishment or loss or escape from fines in cases where actions could typically result in such consequences.