Suppose a student is willing to pay $30/hour for up to 10 hours of tutoring and a tutor is willing to tutor for $16/hour.

Suppose a student is willing to pay $30/hour for up to 10 hours of tutoring and a tutor is willing to tutor for $16/hour.

 What is the amount of economic welfare created by the student buying tutoring services from the tutor?

For each of the government policies given below (1) whether trade between the student and tutor will continue to take place and (2) the amount of dead weight loss (if any) created by policy.

1-     A $15/ hour tax on the tutor. A $5/ hour tax on the tutor.

2-     A $15/ hour tax on the student. A $5/ hour tax on the student.

3-     A $15/ hour price ceiling.

4-     A $31/ hour price floor.

5-     A $15 subsidy for the tutor. Now suppose Student A is willing to pay $30 hour for up to 10 hours of tutoring and student B is willing to pay $20/hour for up to 10 hours of tutoring. Tutors are willing to tutor for $15/hour.

6-     Suppose the tutors from a union and charge 30/ hour. Are the tutors better off than if they charged $20? Does this union create deadweight loss? If so, how much?

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