Question

Suppose that the demand curve for barley can be characterized by the equation P = 100 - 2Qd. Suppose further that price was $10.00 and a $10.00 tax is imposed on the market. a) How many barleys would be purchased at a price of $10.00? After tax? b) What is the amount of tax revenue generated by the tax? c) How much excess burden is generated by the tax? d) What is the amount of consumer surplus before and after the tax? What is the difference in consumer surplus? Is it equal to excess burden plus the tax revenue?

Answer 1

a. 45 , 40

b. $400

c. $25

d. before tax; $2025 and after tax ; $1,600

e. difference in consumer surplus $425

f. Yes it is equal

Step-by-step explanation:

In this question, we are presented with the equation of a demand curve.

Given the price amount and the tax amount, we are asked to answer the questions that follow;

Please check attachment for complete solution and step by step explanation