Consider a market characterized by the following supply and demand equations: QD = 200-10P ; Qs...

   

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Consider a market characterized by the following supply and demand equations: QD = 200-10P ; Qs = 25 +2.5P (a) Depict this market on a fully labelled graph with quantity on the horizontal axis. (b) Solve for the equilibrium price and quantity. Indicate equilibrium graph you drew in (a). Explain why the market clears at the equilibrium price. (c) Find the elasticity of demand and the elasticity of supply at the equilibrium. Indicate for each whether they are elastic, unit elastic, or inelastic. (d) Suppose the government decides to implement an excise tax of T = 10 on producers. What is the new supply equation? Show that consumers bear a tax burden of $2 per unit and producers bear a tax burden of $8 per unit. Relate your findings to the elasticities you found in (c). Consider a market characterized by the following supply and demand equations: QD = 200-10P ; Qs = 25 +2.5P (a) Depict this market on a fully labelled graph with quantity on the horizontal axis. (b) Solve for the equilibrium price and quantity. Indicate equilibrium graph you drew in (a). Explain why the market clears at the equilibrium price. (c) Find the elasticity of demand and the elasticity of supply at the equilibrium. Indicate for each whether they are elastic, unit elastic, or inelastic. (d) Suppose the government decides to implement an excise tax of T = 10 on producers. What is the new supply equation? Show that consumers bear a tax burden of $2 per unit and producers bear a tax burden of $8 per unit. Relate your findings to the elasticities you found in (c).