Question

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?

Answer 1

Explanation:

Qd=1000-p

Qs=700+2p

Qd=Qs