Question

Suppose the demand and supply curves of salt are given by qD = 1,000 − p qS = 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 qS = 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:

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