Microeconomics 2nd Edition by Douglas Bernheim

Exercise 1

Suppose that the demand for a good is Q d = A BP and the supply is Q d = RP S where A , B , R , and S are all positive numbers. Derive a function P* ( T ) describing the equilibrium price as a function of the specific tax T the government places on the good. What is the derivative of the equilibrium price with respect to T (This is known as the "pass-through rate" of the tax). How does it depend on A, B, R, and S