Question: Consider the market for widgets. The demand function in this market is D ( p ) = 2 4 / p and the supply function

Consider the market for widgets. The demand function in this market is D

(

) = 24 /

p and the supply function is S

(

) = 6

.

What is the market equilibrium in this market? If the government levies a lump sum tax of $t on widgets, how much will the burden of the tax be divided between consumers and producers? In particular, will the change in price that consumers pay be more, less, or equal to the change in price that producers receive?

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