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Supply and Demand

Assume there is a market for an industrial compound, Weon. This industrial compound is used as an input for the production of cleaning agents.

a. Draw a correctly labeled graph of supply and demand showing the equilibrium price and quantity. Also clearly identify the equilibrium in this market.

b. Suppose the manufacturing process for this industrial compound has been improved. Draw a correctly labeled graph showing this change in a supply and demand graph. Also explain what is going on and be sure to identify the new equilibrium price and quantity.

c. Suppose that the government decides to impose a price floor in this market for this industrial compound. Draw a correctly labeled graph showing this price floor.

d. Suppose that the government imposes a tax on this industrial compound. Draw a correctly labeled graph showing the effects of this tax on the price and quantity of this industrial compound.

Solution Summary

The effects of this tax on the price and quantity of this industrial compound are embedded.

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