Finding a Market Equilibrium

The market for a good is described by the willingness to pay and willingness to accept curves shown below:

W2P = 400 - 2*Qd

W2A = 100 + Qs

Solve for the equilibrium price and quantity. 

Solution 1

Suppose the market W2P and W2A for a good are given by:

W2P = 189 - 5*Qd

W2A = 4*Qs

In addition, the good is subject to a $9 sales tax collected from the seller. Find the market equilibrium price and quantity, and then calculate the revenue raised by the tax.  Now find the market equilibrium that would have prevailed had there NOT been a tax, and use that information to find the deadweight loss due to the tax.

Check Your Work 2

Suppose the demand and supply for a good are given by the W2P and W2A equations below:

W2P = 225 - 3*Qd

W2A = 100 + Qs

Find the market equilibrium price and quantity.  Then suppose the government introduces a $15 subsidy on each unit to be paid to the seller.  Find the new equilibrium price and quantity, and calculate the total value of the subsidy and the deadweight loss.

Check Your Work 3