A rice producing company faces the following demand function: Qd = 50 – 2P. The firm’s accountant believes that the supply function of the company is given as: Qs =  - 6 + 12P where P denotes price of a kilogram of rice GH¢ and Qd and Qs are the quantities demanded and supplied respectively. Based on this information:
a. Determine the equilibrium price and quantity in the market for the company.
b. Determine the total revenue for the company if the equilibrium quantity is sold.
c. Calculate the total surplus in the market.
d. If the government now decides to impose a per unit tax of GH¢ 1.5 per unit on the quantity supplied and the company adjusts the supply function appropriately to include tax:
i. Determine the new equilibrium price and quantity in the market for the company.
ii. What portion of the tax revenue is paid by consumers?
iii. What portion of the tax revenue is paid by producers?
iv. What is the total tax revenue to government?
v. Calculate the deadweight loss to society.
e. What type of elasticity of demand exists in the market?
f. What type of elasticity of supply exists in the market after the tax imposition?
g. Present graphically the results of the above questions.
h. Given the type of price elasticity of demand in the market, what should the producer do to raise revenue?

Answer rating: 100% (QA)

a For equilibrium the quantity demanded must be equal to quantity prod... View the full answer