Suppose that a certain product has the following demand and supply functions, where p is the price per unit in dollars and q is the quantity produced.
Demand: Supply:
If a $44 tax is placed on each unit of the product of the following. What is the new equilibrium point?

Question

Suppose that a certain product has the following demand and supply functions, where p is the price per unit in dollars and q is the quantity produced. ​
Demand:  Supply:  ​
If a $44 tax is placed on each unit of the product of the following. What is the new equilibrium point?
​

Quizplus · Accepted Answer

With the $44 tax, the new supply curve will shift up by $44, so the new supply function will be:

q = 2p - 44

The new equilibrium point is where the new demand curve intersects the new supply curve.

Setting the demand function equal to the new supply function, we get:

11 - 0.5p = 2p - 44

Solving for p, we get:

p = $28

Substituting into either the demand or supply function, we can find the corresponding quantity:

q = 2($28) - 44 = 12

So the new equilibrium point is ($28, 12), which corresponds to choice B.

Suppose That a Certain Product Has the Following Demand and Supply