Suppose the Demand for Some Good Can Be Estimated Using

question 72

Essay

Suppose the demand for some good can be estimated using the equation Q_D = a - bP,and the supply can be estimated using the equation Q_S = c + dP,where a is the intercept and b is the slope of the demand curve,and c is the intercept and d is the slope of the supply curve.P is the equilibrium price in the market.
(a)If a per-unit excise tax of size T were imposed on each unit of this good sold in the market,show that the percentage of the tax born by the consumer is
[Hint: The tax (T)is equal to the price the consumer pays (i.e. ,P_d. minus the price received by the supplier (P_S).Therefore,T = P_D - P_S.Rearrange and substitute into one of the equations above.]

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Definitions:

Line Graphs

Graphs that use lines to connect data points showing changes in values over time.

Colour

A characteristic of visual perception described through hue, saturation, and brightness.

Glossy Paper

A type of paper with a smooth, shiny surface commonly used for printing high-quality photographs or literature.

Reliability

the degree to which the results of a measurement, calculation, or specification can be depended on to be accurate.