Q $2$

The demand for a product is given by

$Qd=4-0\mathrm{.}5P+Y$

Where $Y$ is income and equals $4$

And supply is given by

$Qs=2+0\mathrm{.}5P$

$($i$)$ Determine the equilibrium price and quantity.

$10$ Marks

$($ii$)$ Suppose a tax of $1$ is put on each unit of the product, what is the new equilibrium price and quantity?

$10$ Marks

$($iii$)$ Illustrate the pre$-$tax and post$-$tax price and quantity on a single demand and supply diagram.

$5$ Marks