Question: Does anyone know the answer for C with an explanation? Example: Price Elasticity Consider a competitive market for which the quantities demanded and supplied (per

 Does anyone know the answer for C with an explanation? Example:

Does anyone know the answer for C with an explanation?

Price Elasticity Consider a competitive market for which the quantities demanded and

Example: Price Elasticity Consider a competitive market for which the quantities demanded and supplied (per year) at various prices are given as follows: QD = -0.1P + 28 Qs = 0.1P +8 a) What is the market clearing price and quantity? Qd = Qs - 0.1P + 28 = 0.1P + 8 20 = 0.2 P P = 100 $ Q = 18 units b) Calculate the price elasticity of demand and supply when price is $80. Demand: in demand formula: -0.1P + 28, slope = -.1 & p = 80, q =20 Ed =%AQ = AQd x P % AP AP Q = -0.1 x (80/20) = - 0.4 Supply: in supply formula: 0.1P + 8, slope = 0.1, when p = 80, q = 16 Es = %AQ = AQs x P % AP AP Q = 0,1 x (80/16) = 3.5 c) If the government imposes a $1 per unit tax on the goods, which of the following statements is most correct? a. Consumers will pay more of the tax b. Consumers will pay all the tax c. Producers will pay more of the tax d. Producers will pay all the tax

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