Suppose That Instead of a Supply-Demand Diagram, You Are Given

question 4

Essay

Suppose that instead of a supply-demand diagram, you are given the following information:
Q_s = 90 + P
Q_d = 300 - 2P
From this information, compute the equilibrium price (P) and quantity (Q).
Now suppose that a tax (T) is placed on buyers so that
Q_d = 300 - 2(P + T).
If T = 12, 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?

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