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Ec130 PS1

# Ec130 PS1 - Econ 130 Tang Practice Problem Set#1 1 Suppose...

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Econ 130: Tang 1 Practice Problem Set #1: 1. Suppose the inverse demand curve for a particular good is P D = 33 – Q and the inverse supply curve is given by P S = 3 + 2 Q. A. Find the equilibrium price and quantity. B. Find the consumer surplus, producer surplus, and the social surplus. C. Suppose the government imposes a tax of \$3 per unit exchanged. Calculate the price paid by demanders, the price received by suppliers, the equilibrium quantity, the producer surplus, the consumer surplus, government revenue and deadweight loss. 2. The government recently instituted a program that subsidizes drugs for senior citizens. Using supply and demand graphs, analyze the effect of this subsidy on (i) the total quantity of drugs purchased; (ii) the price paid by seniors; (iii) the price received by drug companies. (Hint: Recall that in the case of a tax P D = P S + t, so that P D > P S . A subsidy is a negative tax. In the case of a subsidy (s), P D = P S – s, so that P D < P S . ) 3.

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Ec130 PS1 - Econ 130 Tang Practice Problem Set#1 1 Suppose...

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