Asked by Maddie Lofton on Jun 04, 2024
Verified
The inverse demand function for grapefruit is defined by the equation p 122 4q, where q is the number of units sold.The inverse supply function is defined by p 8 2q.A tax of $12 is imposed on suppliers for each unit of grapefruit that they sell.When the tax is imposed, the quantity of grapefruit sold falls to
A) 15
B) 13
C) 19
D) 17
E) 18.
Inverse Demand Function
A mathematical function that expresses the price of a good or service as a function of the quantity demanded, showing how price varies with demand levels.
Tax Imposed
A financial charge or other levy placed upon an individual or a legal entity by a governmental organization in order to fund various public expenditures.
Grapefruit
A large, tart citrus fruit with a segmented interior, often eaten for breakfast or used in culinary dishes.
- Investigate how taxes alter market equilibrium and affect the quantity of goods sold.
- Assess the balance quantities consequent to adjustments in supply and demand.
- Assess how external factors, such as taxes and subsidies, affect market mechanisms.
Verified Answer
AF
Adrienne Franklin
Jun 07, 2024
Final Answer :
D
Explanation :
With the tax, the new inverse supply function becomes p = 8S + 2q + 12. To find the equilibrium quantity sold, we set the new inverse demand function equal to the new inverse supply function:
122 – 4q = 8S + 2q + 12
Solving for q, we get q = 17. Therefore, the quantity of grapefruit sold falls to 17 units.
122 – 4q = 8S + 2q + 12
Solving for q, we get q = 17. Therefore, the quantity of grapefruit sold falls to 17 units.
Learning Objectives
- Investigate how taxes alter market equilibrium and affect the quantity of goods sold.
- Assess the balance quantities consequent to adjustments in supply and demand.
- Assess how external factors, such as taxes and subsidies, affect market mechanisms.