Explore BrainMass
Share

Explore BrainMass

    consumer surplus

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Suppose you are an aide to a U.S. Senator who is concerned about the impact of a recently proposed excise tax on the welfare of her constituents. You explained to the Senator that one way of measuring the impact on her constituents is to determine how the tax change affects the level of consumer surplus enjoyed by the constituents. Based on your arguments, you are given the go-ahead to conduct a formal analysis, and obtain the following estimates of demand and supply:
    Qd=500-5P and Qs=2P-60 .
    a. Graph the supply and demand curves.
    b. What are the equilibrium quantity and equilibrium price?
    c. How much consumer surplus exists in this market?
    d. If a $2 excise tax is levied on this good, what will happen to the equilibrium price and quantity?
    e. What will the consumer surplus be after the tax?

    © BrainMass Inc. brainmass.com October 10, 2019, 12:43 am ad1c9bdddf
    https://brainmass.com/economics/demand-supply/consumer-surplus-304275

    Solution Summary

    This job examines consumer surplus.

    $2.19