Macroeconomics 1st Edition by Dean Karlan,Jonathan Morduch

Exercise 11

Suppose you have the information shown in Table 6P-2 about the quantity of a good that is supplied and demanded at various prices.
a. Plot the demand and supply curves on a graph, with price on the y -axis and quantity on the x -axis.
b. What are the equilibrium price and quantity?
c. Suppose the government imposes a $15 per unit tax on sellers of this good. Draw the new supply curve on your graph.

d. What is the new equilibrium quantity? How much will consumers pay? How much will sellers receive after the tax?
e. Calculate the price elasticity of demand over this price change.
f. If demand were less elastic (holding supply constant), would the deadweight loss be smaller or larger?