1)

Question 1 [10 Marks Total) Consider the following equations of demand and supply that characterize the market for a particular good. P270 3 Q1 P225+2 QS With the aid of a labelled diagram, identify the economic effects if the government sets a legal minimum price for this good, P\"'= $49. P- Initial Equilibrium Price (1 mark) Initial Equilibrium Quantity (1 mark) Quantity:r Demanded at Pr [2 markleuantity Supplied at Pf [2 marks) Is there a surplus or a shortage of the good in the market? (1 mark] What is the magnitude of the surplus or shortage? [1 mark) If the government supports this price floor, what will be the cost to government? (2 marks) Question 2 [10 Marks) Consider the market for a good, where demand and supply are given by the following equations. P234Qd P:10+2 Q5 With the aid of a labelled diagram analyse the economic effects of a $3 per unit tax on this good, charged to consumers. P Initial Equilibrium Price [1 mark) Initial Equilbrium Quantity (1 mark) New Equilibrium Quantity (1 mark) New Producers\" Price (1 markJNew ConSumers' (tax included) Price [1 mark} Burden of the Tax on Cdn5umer5 [2 marks) Burden of the Tax on Producers [2 marks) Tax Revenue to the Government [1 mark)