Suppose the demand for some good can be estimated using the equation Q_D = a - bP,and the supply can be estimated using the equation Q_S = c + dP,where a is the intercept and b is the slope of the demand curve,and c is the intercept and d is the slope of the supply curve.P is the equilibrium price in the market.
(a)If a per-unit excise tax of size T were imposed on each unit of this good sold in the market,show that the percentage of the tax born by the consumer is
[Hint: The tax (T)is equal to the price the consumer pays (i.e. ,P_d. minus the price received by the supplier (P_S).Therefore,T = P_D - P_S.Rearrange and substitute into one of the equations above.]

Question

Suppose the demand for some good can be estimated using the equation Q_D = a - bP,and the supply can be estimated using the equation Q_S = c + dP,where a is the intercept and b is the slope of the demand curve,and c is the intercept and d is the slope of the supply curve.P is the equilibrium price in the market.
(a)If a per-unit excise tax of size T were imposed on each unit of this good sold in the market,show that the percentage of the tax born by the consumer is

Suppose the demand for some good can be estimated using the equation Q<sub>D</sub> = a - bP,and the supply can be estimated using the equation Q<sub>S</sub> = c + dP,where a is the intercept and b is the slope of the demand curve,and c is the intercept and d is the slope of the supply curve.P is the equilibrium price in the market. (a)If a per-unit excise tax of size T were imposed on each unit of this good sold in the market,show that the percentage of the tax born by the consumer is [Hint: The tax (T)is equal to the price the consumer pays (i.e. ,P<sub>d.</sub> minus the price received by the supplier (P<sub>S</sub>).Therefore,T = P<sub>D</sub> - P<sub>S</sub>.Rearrange and substitute into one of the equations above.]

[Hint: The tax (T)is equal to the price the consumer pays (i.e. ,P_d. minus the price received by the supplier (P_S).Therefore,T = P_D - P_S.Rearrange and substitute into one of the equations above.]

Quizplus · Accepted Answer

The Answer of Suppose the demand for some good can be estimated using the equation Q_D = a - bP,and the supply can be estimated using the equation Q_S = c + dP,where a is the intercept and b is the slope of the demand curve,and c is the intercept and d is the slope of the supply curve.P is the equilibrium price in the market. (a)If a per-unit excise tax of size T were imposed on each unit of this good sold in the market,show that the percentage of the tax born by the consumer is [Hint: The tax (T)is equal to the price the consumer pays (i.e. ,P_d. minus the price received by the supplier (P_S).Therefore,T = P_D - P_S.Rearrange and substitute into one of the equations above.]

Suppose the Demand for Some Good Can Be Estimated Using