A populated rural area is located about 35 miles southeast of major city. Residents from this area typically commute to the major city for school, work and entertainment. Rather than using their own vehicals to commute to and from the city (the price for parking in the city is quite high), many residents of the rural area realy on other modes of transportations (train, bus, or taxicab).

Consider that the market demand for a taxicab trip is describe by the following equation Qd=290-20P where QD represents the number of taxi trips (one way) demanded per day. The price per trip varies with the total time and length of each trip and so P represent the average price of a taxi trip. The market supply of taxi trips is described by the equation: Qs= -100+40P, where Qs represents the number of trips (one way) supplied per day.

To address what seems to be a growing traffic congestion problem, the city government implements a tax of $2.70 on the taxicab supplies.

Q1 - What is the current market price (report your answer up to 2 decimal places in the space.

Q2 - What is current market quantity traded (r report your answer up to 2 decimal places in the space provided).

Q3- What is can be said about the current mrarket outcome? 

 

 

Answer rating: 100% (QA)

Q1 To find the current market price we need to determine the equilibrium price befo... View the full answer