1. The demand curve for cab rides is p = 5 – The supply curve is p = 2 for y < 2,500 and it becomes perfectly inelastic at y = 2,500. where y represents passenger miles. 1,000' (i) Find the equilibrium price and quantity. (ii) Find the consumers' surplus and producers' surplus. (iii) Suppose that an excise tax of e = 0.50 per passenger mile is imposed on suppliers. Find the new equilibrium price and quantity. (iv) Finally, suppose that a sales tax of t = 0.50 is imposed on consumers. (The excise tax is still in place.) Find the new equilibrium price and quantity.

1. The demand curve for cab rides is p = 5 – The supply curve is p = 2 for y < 2,500 and it becomes perfectly inelastic at y = 2,500. where y represents passenger miles. 1,000' (i) Find the equilibrium price and quantity. (ii) Find the consumers' surplus and producers' surplus. (iii) Suppose that an excise tax of e = 0.50 per passenger mile is imposed on suppliers. Find the new equilibrium price and quantity. (iv) Finally, suppose that a sales tax of t = 0.50 is imposed on consumers. (The excise tax is still in place.) Find the new equilibrium price and quantity.

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter5: Elasticity Of Demand And Supply

Section5.A: Appendix: Price Elasticity And Tax Incidence

Problem 2AQ

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