202-S08 PS1 - Economics 202 Problem Set 1 Spring 2008 Eric...

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Economics 202 Spring 2008 Problem Set 1 Eric Schulz 1. Demand: Q d = 35 – 3P, Supply: Q s = -5 + 2P For this demand and supply system, use graphs and math to answer the following. a. Solve for the equilibrium price and quantity. b. A ceiling (maximum) price is imposed at $4. i.What is the quantity demanded? ii.What is the quantity supplied? iii.Indicate whether there is a shortage, surplus, or a nonbinding constraint. c. A floor (minimum) price is imposed at $4. i.What is the quantity demanded? ii.What is the quantity supplied? iii.Indicate whether there is a shortage, surplus, or a nonbinding constraint. 2. Consider again the supply and demand system in #1. Suppose an excise (per unit) tax in the amount of $2.00 is imposed. A. What is the equilibrium price and quantity (P AT , Q AT )? B. What is the price received by producers net of the tax (P N )? C. How much tax revenue does this tax create? D. What proportion of the tax is borne by consumers? E. What proportion of the tax is borne by producers?
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