Suppose the demand for some good can be estimated using the equation QD = a - bP,and the supply can be estimated using the equation QS = 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 ![Suppose the demand for some good can be estimated using the equation Q<sub>D</sub> = a - bP,and the supply can be estimated using the equation Q<sub>S</sub> = 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<sub>d.</sub> minus the price received by the supplier (P<sub>S</sub>).Therefore,T = P<sub>D</sub> - P<sub>S</sub>.Rearrange and substitute into one of the equations above.]](https://d2lvgg3v3hfg70.cloudfront.net/TB1826/11ecb65f_2664_2c28_a4bb_c93074a77dab_TB1826_11.jpg)
[Hint: The tax (T)is equal to the price the consumer pays (i.e. ,Pd. minus the price received by the supplier (PS).Therefore,T = PD - PS.Rearrange and substitute into one of the equations above.]
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