Asked by Danielle Szajdek on Jul 18, 2024
Verified
The inverse demand function for eggs is p 84 9q, where q is the number of cases of eggs.The inverse supply is p 7 2q.In the past, eggs were not taxed, but now a tax of 33 dollars per case has been introduced.What is the effect of the tax on the quantity of eggs supplied?
A) Quantity drops by 2 cases.
B) Quantity drops by 3 cases.
C) Quantity drops by 6 cases.
D) Quantity drops by 4 cases.
E) None of the above.
Inverse Demand Function
A mathematical function showing the relationship between the price of a good and the quantity demanded, illustrating how price can be determined as a function of quantity.
Inverse Supply
A concept in economics that describes the relationship between the price of a good and the quantity supplied by producers, typically showing that as price decreases, the quantity supplied decreases.
Tax
Compulsory contributions to state revenue, levied by the government on workers' income, business profits, or added to the cost of some goods, services, and transactions.
- Assess the role of taxes in affecting market equilibrium, including how they alter the quantities supplied and demanded.
Verified Answer
DT
Dharsaka TennekoonJul 23, 2024
Final Answer :
B
Explanation :
The new price paid by consumers, including the tax, is p = 84 9q + 33.
Setting that equal to the supply equation, we get: 84 9q + 33 = 7 2q
Simplifying that expression gives:
126- 18q= 231 -33
Rearranging and solving for q yields:
q = 3. Considering that the original quantity supplied was q=5, the effect of the tax is a decrease of 2 cases. Therefore, the answer is (B) Quantity drops by 3 cases.
Setting that equal to the supply equation, we get: 84 9q + 33 = 7 2q
Simplifying that expression gives:
126- 18q= 231 -33
Rearranging and solving for q yields:
q = 3. Considering that the original quantity supplied was q=5, the effect of the tax is a decrease of 2 cases. Therefore, the answer is (B) Quantity drops by 3 cases.
Learning Objectives
- Assess the role of taxes in affecting market equilibrium, including how they alter the quantities supplied and demanded.