Completed quickly and followed instructions given. Grammar, spelling, etc. was all good as well. Thank you so much! Will hire in the future.
1. [30 marks] Pieland County has a perfectly competitive market for apples. Each day, the
demand and supply for kilograms of apples are given by:
(a) [8 marks] Calculate the equilibrium (p* and Q*) and draw an accurate diagram of the
apple market. Calculate CS and PS at the equilibrium.
(b) [12 marks] Suppose the government of Pieland brings in a tax of $1.50 per kilogram
of apples, and makes sellers collect this tax. Find:
– The consumer’s price (pc) and producer’s price (pp) after the tax
– The new CS and PS
– The DWL created by the tax
– The revenue raised by the tax
– The amount of this revenue which is paid by buyers and sellers, respectively.
Draw a diagram of the market after-tax and show all of the above on your diagram.
(c) [4 marks] Show that your answers would be the same if buyers collected the tax
instead of sellers. (You don’t have to repeat everything: just find QT, pc and pp in this
(d) [6 marks] Use the demand curve to find the elasticity of demand between p* and pc
(using the midpoint method). Use the supply curve to find the elasticity of supply
between p* and pp (using the midpoint method). Use your answers to argue that
“the less elastic side of the market bears more of the burden of the tax.”
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