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Unformatted text preview: (b) p d = p s + t (c) equilibrium happens when D ( p d ) = S ( p s ) (d) put equations together: • D ( p s + t ) = S ( p s ) • or D ( p d ) = S ( p d-t ) (e) also can solve using inverse demands: • P d ( q ) = P s ( q ) + t 1 • or P d ( q )-t = P s ( q ) (f) see Fgure 16.3. and Fgure 16.4. in the textbook 5. Passing along a tax (see Fgure 16.5. in the textbook) (a) ±at supply curve (b) vertical supply curve 6. Deadweight loss of a tax (see Fgure 16.7. in the textbook) (a) beneFts to consumers (b) beneFts to producers (c) value of lost output 7. Pareto e²ciency (a) e²cient output is where demand equals supply (b) because that is where demand price equals supply price (c) that is, the marginal willingness to buy equals the marginal willingness to sell (d) deadweight loss measures loss due to ine²ciency 2...
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- Summer '10
- Supply And Demand, pareto, inverse demand curve