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    incidence of the tax

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    Assume that the demand function is given by x=P^-n, and the supply function by y= p^e. Find the equilibrium price. Determine the effect on the equilibrium price of the introduction of a tax t=0.1 if n= e=0.5. Finally, describe how the incidence of the tax is divided between the consumers and producers.

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    https://brainmass.com/economics/general-equilibrium/incidence-tax-351468

    Solution Preview

    Answer:
    We have,
    x=P^(-n)=1/P^n
    Or,
    P=(1/x)^(1/n)
    Now total revenue is:
    TR=P*1/P^n =P^(1-n)
    And marginal revenue ...

    Solution Summary

    This tutorial advises how the incidence of the tax is divided between the consumers and producers.

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