Week 5, Econ 101 Discussion
Excise Taxes
1.Suppose the demand and supply for soft drinks is:QD= 20-PQS= 3Pa.) Solve for the equilibrium price and quantity.Suppose the government imposes a per-unit tax of $4 on the sellers.b.) Solve for the new quantity, the net price received by sellers, and the price paid by consumers.c.) Calculate the government revenue from the tax.d.) Calculate the deadweight loss resulting from the tax.e.) What fraction of the economic incidence of the tax is borne by consumers?Suppose that instead of imposing the tax on the sellers, the government divides the nominal burden.Consumers must pay $1.11 per unit and suppliers must pay $2.89 per unit.f.) What fraction of the economic incidence of the new tax is borne by suppliers?2.Consider the market for parking permits around campus.The demand and supply are givenbelow.QD= 400-4PQS= 80a.) Solve for the equilibrium price and quantity.Suppose a $5 excise tax is instituted.b.) Solve for the new prices and quantity.c.) Calculate the deadweight loss resulting from the tax.