Consider a perfectly competitive market with market supply QS = -2 + P and market demand QD = 40 – P/2.

Posted: December 30th, 2021

85 = – 2 + PQ = 40 – 1/2Tax = $ 6 per widLet’s assume the tax is on the sellers.This would shift the supply cwere upby the amount of the tax.Q5 = – 2 + PP = Qs+ 27 P’ = Q5 + ( 2 + 6 ) : New is Curve.* P’ = Q5+8.Of = P’- 8P32DWL = areaAE’EL28 102626 .At new equilibrium :Q5″ = QD + P – 8 = 40- 1/23 P / 2 = 48 = P = 328 = P- 8 = 24.8′ = 24, Pb = 32 , Pg = Pp – t =” is = 32 – 6 = 26.At original equilibrium :& = QD 3 – 2 + P= 40- P/242 = 3P/2 2 P= 289 = – 2 + P 2 6 = 26DWL = 1 * (32- 26) ( 26- 24) 2 1X6*2DWL = $ 6