Question

# The demand curve for Mars bars (deluxe edition) is D(P) = 200 − 5P and the supply curve S(P) = 5P. a) Show in a

graph the demand curve and the supply curve. What is the equilibrium market price? What is the quantity sold in equilibrium? b) A quantity tax of $2 per unit sold is placed on Mars bars (deluxe edition). In your graph, analyze the effect of the tax by shifting the supply curve upwards. Calculate the new equilibrium price paid by demanders, the new price received by suppliers, and the equilibrium quantity sold. c) Calculate numerically the deadweight loss due to this tax. In your graph, shade in the area that represents the deadweight loss. Explain intuitively what the deadweight loss measures.

#### Top Answer

a. P = 20 Q = 100 b. Pd =... View the full answer