Suppose the demand curve for oranges is given by the equatio

Suppose the demand curve for oranges is given by the equation

Q =200P+ 1000

with quantity (Q) measured in oranges per day and price (P) measured in dollars per orange. The

supply curve is given by:

Q= 800P

(for part F and G) b) (2 pts.) Suppose that an excise tax of 50 cents apiece is imposed on oranges. What are the

equations for the new supply and demand curves?

Quenstions needed E,F,G

e) (4 pts.) Illustrate using supply and demand curves.

f) (6 pts.) Repeat part b) through e) with a 50 cents sales tax instead of an excise tax.

g) (6 pts.) Repeat part b) through e) assuming that an excise tax of 20 cents and a sales tax of 30

cents are imposed simultaneously

Solution

When excise tax of 50 cents is levied

supply curve

Q = 800P +0.50

When sales tax s levied

Supply curve

Q = 800.50P

When excise tax of 20 cents and sales tax of 30 cents is levied

Q = 0.20+800.30P