Suppose the market demand function is D(Pd ) = 120 - Pd and the market supply

function is S(Ps ) = 2Ps

(a)Find the free market equilibrium.

(b)Suppose that the supplier is required to pay a per unit tax of t = 3. Draw a graph to show this change in policy compared to the no-tax policy. Find the equilibrium quantity and prices Ps and Pd . Does the tax increase or decrease the equilibrium quantity? How much of the tax is passed on to the consumer?

(c) Suppose now that the demander, other than the supplier, is required to pay a per unit tax of t = 3. Draw a graph to show this change in policy compared to the no-tax policy. Find the equilibrium quantity and prices Ps and Pd . Compare the equilibria inparts (b) and (c).(Are they the same?)

(d) Calculate the change in consumer's surplus, the change in producer's surplus, the

tax revenue, and the deadweight loss as a result of the tax policy in part (b)