Green is quantity supplied, red is quantity demanded for .
For (b) set or . So .
For (c) set . So .
For (d) use (b) and (c) to try and find a functional relationship between and (i.e. is it a linear equation , a quadratic etc.).
Demand and supply for a commodity are given by
qd = 18 - 2p and qs = -10 + 5p (1 - t)
respectively where t is a tax levied on each unit sold (to be paid by the producer).
a) Draw the supply and demand curves on the same diagram when t = 0
b) Find the equilibrium quantity sold when t = 0
c) Find the equilibrium quantity sold when t = 0.32 (i.e a tax rate of 32%).
d) Derive a functional relationship between p and t in equilibrium.
Green is quantity supplied, red is quantity demanded for .
For (b) set or . So .
For (c) set . So .
For (d) use (b) and (c) to try and find a functional relationship between and (i.e. is it a linear equation , a quadratic etc.).