5. Suppose that the demand and supply equations are given by $Q_D = 286 - 20p$ and $Q_S = 88 + 40p$ respectively. For this question, you can round up everything with two decimal places whenever appropriate. Use the demand function and after tax supply function to solve for the new equilibrium price and quantity.
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First, we need to find the equilibrium price and quantity before the tax is imposed. This is where the demand and supply curves intersect, so we set QD=QS and solve for p: 286-20p = 88+40p 60p = 198 p = 3.30 Q = 286-20(3.30) = 220 So the equilibrium price is Show more…
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