In order to reduce pollution a country has decided to introduce a tax of $4 per ton of fertilizer. The economic advisors of the country estimate the supply and demand curves for fertilizers as: S=210+75P_Sand D=560- 25P_D where D represents the daily demand in tons for fertilizers and p_Dis the price of one ton of fertilizers paid by the consumer. S represents the daily supply in tons for fertilizers and p_Sis the price actually received by the supplier.
a)What are the pre- tax equilibrium quantities and prices?
b)It has been decided that the tax revenue will be collected from the store selling fertilizers, so that the price advertised to the consumer include the tax. Show graphically the effect of this tax on the market equilibrium quantity and price. Calculate the post- tax equilibrium quantity and prices.
c)What is the tax revenue earned by the government? What is the deadweight loss in surplus brought about by the tax? What proportion of the tax will be borne by the consumer?

Question

Quizplus · Accepted Answer

The Answer of In order to reduce pollution a country has decided to introduce a tax of $4 per ton of fertilizer. The economic advisors of the country estimate the supply and demand curves for fertilizers as: S=210+75P_Sand D=560- 25P_D where D represents the daily demand in tons for fertilizers and p_Dis the price of one ton of fertilizers paid by the consumer. S represents the daily supply in tons for fertilizers and p_Sis the price actually received by the supplier. a)What are the pre- tax equilibrium quantities and prices? b)It has been decided that the tax revenue will be collected from the store selling fertilizers, so that the price advertised to the consumer include the tax. Show graphically the effect of this tax on the market equilibrium quantity and price. Calculate the post- tax equilibrium quantity and prices. c)What is the tax revenue earned by the government? What is the deadweight loss in surplus brought about by the tax? What proportion of the tax will be borne by the consumer?

In Order to Reduce Pollution a Country Has Decided to Introduce