Residents in the city of Econoville enjoy only two types of recreational activities. The activities are biking and attending concerts. The demand for concert tickets is:
= 90,000 - 1,000 P_C + P_B.
The supply of biking trail permits is set at:
= 150,000. The demand for biking trail permits is
= 250,000 - 1,000 P_B + 20 P_C. The city wishes to expand seating capacity at concert events. To finance the concert hall expansion, the city is considering a tax of $20 on biking permits. Given the city institutes this plan, the supply of concert tickets will become
= 75,000. Before the expansion of the concert hall, the supply of concert tickets was fixed at 60,000. What is the effect on equilibrium prices of the additional seating capacity and the $20 tax on biking permits? How much revenue does the tax generate? Did concert ticket revenue increase due to adding seating capacity and the tax?

Question

Residents in the city of Econoville enjoy only two types of recreational activities. The activities are biking and attending concerts. The demand for concert tickets is:

= 90,000 - 1,000 P_C + P_B.
The supply of biking trail permits is set at:

= 150,000. The demand for biking trail permits is

= 250,000 - 1,000 P_B + 20 P_C. The city wishes to expand seating capacity at concert events. To finance the concert hall expansion, the city is considering a tax of $20 on biking permits. Given the city institutes this plan, the supply of concert tickets will become

= 75,000. Before the expansion of the concert hall, the supply of concert tickets was fixed at 60,000. What is the effect on equilibrium prices of the additional seating capacity and the $20 tax on biking permits? How much revenue does the tax generate? Did concert ticket revenue increase due to adding seating capacity and the tax?

Quizplus · Accepted Answer

The Answer of Residents in the city of Econoville enjoy only two types of recreational activities. The activities are biking and attending concerts. The demand for concert tickets is: = 90,000 - 1,000 P_C + P_B. The supply of biking trail permits is set at: = 150,000. The demand for biking trail permits is = 250,000 - 1,000 P_B + 20 P_C. The city wishes to expand seating capacity at concert events. To finance the concert hall expansion, the city is considering a tax of $20 on biking permits. Given the city institutes this plan, the supply of concert tickets will become = 75,000. Before the expansion of the concert hall, the supply of concert tickets was fixed at 60,000. What is the effect on equilibrium prices of the additional seating capacity and the $20 tax on biking permits? How much revenue does the tax generate? Did concert ticket revenue increase due to adding seating capacity and the tax?

Residents in the City of Econoville Enjoy Only Two Types