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Suppose that instead of a supply-demand diagram, you are given the following information:
Qs = 100 + 3P Qd = 400 - 2P
From this information compute equilibrium price and quantity. Now suppose that a tax is placed on buyers so that
Qd = 400 - 2P + T).
If T = 15, solve for the new equilibrium price and quantity. Note: P is the price received by sellers and P + T is the price paid by buyers.) Compare these answers for equilibrium price and quantity with your first answers. What does this show you?
Frame Dependence
The influence of presentation or context on individuals' decision-making processes and perception.
Mental Accounting
The tendency of individuals to allocate money for specific purposes in separate mental accounts, affecting their spending and saving behavior.
Confirmation Bias
Confirmation bias is the tendency to search for, interpret, favor, and recall information in a way that confirms one's preexisting beliefs or hypotheses, often leading to statistical errors in decision-making.
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