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Market Analysis is achieved.

Q1) Market Analysis: Suppose that demand for oranges is given by the following Equations:
Q= -200P + 1000
With quantity (Q) measured in oranges per day and price (P) measured in dollars per orange. The supply curve is given by
Q= 800P

A. Compute the equilibrium price and quantity of oranges.

B. Suppose that an excise tax of 50 cents apiece is imposed on oranges. What are the new supply and demand curves? What is the new equilibrium price and quantity of oranges? What is the new post-tax price from the supplier's point view? Illustrate your answer by drawing the supply and the demand curves.

C. Repeat the exercise for 50 cents sale tax instead of excise tax.

D. Suppose that an excise of 20 cents apiece and a sales tax of 30 cents are imposed simultaneously, answer again all the questions in part (B).

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Solution Preview

a. Given Q= -200P + 1000 and Q= 800P, solving the 2 variables system gives P = 1 and Q = 800.

b. Suppose that a $0.5 tax is imposed on the seller, then we should note that the buyers pay Pb and the ...

Solution Summary

Market Analysis is achieved.