Calculating equilibrium price and quantity
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Use the following supply and demand functions to answer the questions below:
Qd = 20-2P, Qs = 5+3P
a. Determine the equilibrium price and quantity and illustrate with a graph.
b. The government imposes a tax of $5.00. Find the new equilibrium price and quantity.
c. Determine the total tax revenue earned by the government.
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Solution Summary
Solution describes the steps to calculate the equilibrium price and quantity with and without the presence of tax. It also calculates the tax revenue collected by the government.
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Please refer attached file for the graph.
a. Determine the equilibrium price and quantity and illustrate with a graph.
In equilibrium Qd=Qs
20-2P=5+3P
15=5P
P=3
Qd=20-2*3=14
Qs=5+3*3=14
Equilibrium ...
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- BEng (Hons) , Birla Institute of Technology and Science, India
- MSc (Hons) , Birla Institute of Technology and Science, India
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