This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: . Adding to both sides of the equation gives 3 = 300. Dividing both sides by 3 gives = 100. Plugging = 100 back into either equation for quantity demanded or supplied gives Q = 200. b. Now P is the price received by sellers and P + T is the price paid by buyers. Equating quantity demanded to quantity supplied gives 2P = 300  ( + ). Adding to both sides of the equation gives 3 = 300 – . Dividing both sides by 3 gives = 100 – /3. This is the price received by sellers. The buyers pay a price equal to the price received by sellers plus the tax ( + = 100 + 2 /3). The quantity sold is now = 2 = 200 – 2 /3. c. Because tax revenue is equal to x and = 200 – 2 /3, tax revenue equals 200 2 2 /3. Figure 3 shows a graph of this relationship. Tax revenue is zero at = 0 and at = 300. Figure 3 2...
View
Full
Document
This note was uploaded on 04/26/2011 for the course ECON 201 taught by Professor Joyce during the Spring '07 term at Drexel.
 Spring '07
 Joyce
 Microeconomics, Deadweight Loss

Click to edit the document details