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The demand for ice cream is given by QP = 20 – 2P and measured in gallons of ice cream

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The demand for ice cream is given by QP = 20 – 2P and measured in gallons of ice cream. The supply is given by QS = 4P – 10. a. Use the graph below to plot the supply and demand curves. Demand Supply 10 9 8 7 6 Price 5 4 3 2 1 0 0 5 10 25 30 35 40 15 20 Quantity
b. The equilibrium price and quantity are: pE = $5; QE = 10 O pE = $5; QE = 5 pE = $10; QE O pE = $10; QE = 30 = 10 c. When comparing the supply and demand curve, which is more inelastic? d. Suppose the government legislates a $1 tax per gallon of ice cream to be collected from the buyer. What will happen to the demand for ice cream? e. With this tax scheme, who will bear the greater tax burden? Buyers will bear all of the tax burden because the tax is specifically levied on them. The tax burden is shared equally between the buyers and sellers. Suppliers will bear the tax burden because supply is more inelastic than demand. Buyers will bear the greater burden because demand is more inelastic than supply.
b. The equilibrium price and quantity are: pE = $5; QE = 10 O pE = $5; QF = 5 O pE = $10; QE O pE = $10; QF = 30 = 10 c. When comparing the supply and demand curve, which is more inelastic? Supply They are both unit elastic. Demand stays constant increase decrease The tax burden is shared equally between the buyers and sellers. Suppliers will bear the tax burden because supply is more inelastic than demand. Buyers will bear the greater burden because demand is more inelastic than supply.