The demand curve for ski lessons is given by D (pD) = 100−2pD and the supply curve is given by S (pS) = 3pS.
(a) What is the equilibrium price? _______. What is the equilibrium quantity?______.
(b) A tax of $10 per ski lesson is imposed on consumers. Write an equation that relates the price paid by demanders to the price received by suppliers. ________. Write an equation that states that supply equals demand. _________.
(c) Solve these two equations for the two unknowns’ pS and pD. With the $10 tax, the equilibrium price pD paid by consumers would be ______ per lesson. The total number of lessons given would be _______.
(d) A senator from a mountainous state suggests that although ski lesson consumers are rich and deserve to be taxed, ski instructors are poor and deserve a subsidy. He proposes a $6 subsidy on production while maintaining the $10 tax on consumption of ski lessons. Would this policy have any different effects for suppliers or for demanders than a tax of $4 per lesson?