homework2spring2006

homework2spring2006 - Economics 102 Spring 2006 Homework #2...

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Economics 102 Spring 2006 Homework #2 Problem 1 The following table gives the demand and supply for portable CD players at certain prices. Assume that the demand and supply functions are linear. Price Quantity Demanded Quantity Supplied 35 690 105 87 378 261 (a) Calculate the demand and supply functions for this market. (b) Find the equilibrium price and quantity in this market. (c) The government puts a tax of $5 on portable CD players, requiring producers to give the government $5 for every unit they sell. (i) What will the new equilibrium price and quantity be? (ii) Calculate consumer and producer surplus and the government’s tax revenue as a result of this policy. (iii) Will the equilibrium price and quantity differ if consumers have to pay the tax to the government instead of the producers? (d) Because of the popularity of ipods and mp3 players, the demand for portable CD players has decreased by 25%. That is, at each price, people want to buy 25% less of the good. Calculate the new demand curve and the new equilibrium
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homework2spring2006 - Economics 102 Spring 2006 Homework #2...

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