Ch1a - Chapter 1 Practice A 1 Let the demand and supply for...

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Chapter 1 Practice A 1. Let the demand and supply for rental cars in Dallas be defined as (price is a daily rate): Demand: Q = -100P + 8000 Supply: Q = 50P – 250 a. Graph the demand and supply curves and calculate the equilibrium price. b. Suppose a $10 sales tax is imposed on car rentals in Dallas. Calculate the new equilibrium P and Q. Indicate the new situation on your graph. What is the economic incidence of the tax? That is, how much does the price that consumers pay for car rental change and how much does the price suppliers receive change after the tax is put into effect? 2. Boomerang throwing is the national pastime for citizens of the island republic of Pago-Pago. The demand for boomerangs is the following: P = 40 – 1.5Q . Pago-Pago also has a large boomerang manufacturing industry, whose supply of boomerangs is the following: P = 4 + .5Q . a. Plot the demand and supply for boomerangs in Pago-Pago. Clearly identify the axes, intercepts, and equilibrium price and quantity.
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This note was uploaded on 03/14/2012 for the course ECON 2243 taught by Professor Henryfors during the Spring '12 term at Abant İzzet Baysal University.

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Ch1a - Chapter 1 Practice A 1 Let the demand and supply for...

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