Suppose that the demand for cigarettes is given by [Math Processing Error]Qd=2000−200P, where [Math Processing Error]Qd is the number of packs demanded and [Math Processing Error]P is the price pack

Marketing Jan 09, 2021

Suppose that the demand for cigarettes is given by [Math Processing Error]Qd=2000−200P, where [Math Processing Error]Qd is the number of packs demanded and [Math Processing Error]P is the price pack. The supply of cigarettes is [Math Processing Error]Qs=200P.

a. Find the equilibrium price and equilibrium quantity of cigarettes, assuming the market is competitive.

b. In an effort to reduce cigarette smoking, the government levies a tax [Math Processing Error]$2 per pack on buyers.

i) Compute the quantity of cigarettes bought and sold after tax,

ii) Compute the price paid by consumers and price received by the sellers after-tax,

iii) How much revenue does the tax raise for the government?

iv) What percent of the economic incidence falls on buyers and on seller?

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