Suppose the Market for Grass Seed Can Be Expressed As

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The Answer is First rearrange the supply curve,p = Q/3.Sellers must receive this price plus 10% more to pay the tax.Thus p + tax = (1.1Q)/3.Substituting into the demand curve yields Q = 100 - (2.2/3)Q or (5.2/3)Q = 100 or Q = 57.69.Solving for price plus tax yields p + tax = (100 - 57.69)/2 = 21.15.Note price does not rise by 10% of the old price of 20; 21.15 represents the new price plus the 10% tax.Solving for the price yields p = 21.15/1.1 = 19.23.Tax revenue equals (21.15 - 19.23)∗ 57.69.

Suppose the Market for Grass Seed Can Be Expressed As

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Suppose the Market for Grass Seed Can Be Expressed As

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