Supposethe demand and supply curves of salt are given by:qD = 1,000 �

1.	Supposethe demand and supply curves of salt are given by:qD = 1,000 − p qS= 700 + 2p(a) Findthe equilibrium price and quantity.(b) Now, suppose that the price of an input that used to produce salthas increased so, that the new supply curve isqS = 400 +2pHow does the equilibrium price and quantity change? Does the changeconform to your expectation?(c) Suppose the government has imposed a tax of Rs 3 per unit of saleon salt. How does it affect the equilibrium rice quantity?
Answer» Suppose the demand and supply curves of salt are given by: q^D = 1,000 − p q^S = 700 + 2p (a) Find the equilibrium price and quantity. (b) Now, suppose that the price of an input that used to produce salt has increased so, that the new supply curve is q^S = 400 +2p How does the equilibrium price and quantity change? Does the change conform to your expectation? (c) Suppose the government has imposed a tax of Rs 3 per unit of sale on salt. How does it affect the equilibrium rice quantity?

Supposethe demand and supply curves of salt are given by:qD = 1,000 − p qS= 700 + 2p(a) Findthe equilibrium price and quantity.(b) Now, suppose that the price of an input that used to produce salthas increased so, that the new supply curve isqS = 400 +2pHow does the equilibrium price and quantity change? Does the changeconform to your expectation?(c) Suppose the government has imposed a tax of Rs 3 per unit of saleon salt. How does it affect the equilibrium rice quantity?

Answer»

Suppose
the demand and supply curves of salt are given by:

q^D = 1,000 − p q^S
= 700 + 2p

(a) Find
the equilibrium price and quantity.

(b) Now, suppose that the price of an input that used to produce salt
has increased so, that the new supply curve is

q^S = 400 +2p

How does the equilibrium price and quantity change? Does the change
conform to your expectation?

(c) Suppose the government has imposed a tax of Rs 3 per unit of sale
on salt. How does it affect the equilibrium rice quantity?