D11: Finding Market Equilibria

Download the Excel template in teams and use it as follows. Please note that you'll need to use the full Excel app, not the web version.

1. Name the Pd, Tax and Ps cells.
2. Fill in the green parameter cells with the data from the pencil-and-paper exercise where `Q^d=200-P^d` and `Q^s=-40+2P^s`. Leave Pd set at 5.
3. Add appropriate equations to the Ps, Qd, Qs and Qd-Qs cells.
4. Use Goal Seek to solve for the BAU equilibrium when the tax is 0 and verify that it's the same as the pencil-and-paper result.
5. Use Goal Seek again to solve for the policy case equilibrium when the tax is $30 and verify that it's also correct.
6. Now that you've tested the spreadsheet, revise it so you can analyze a market with `Q^d = 2000-4P^d` and `Q^s =-400+2P^s`.
7. Suppose that there's currently a tax equal to 150 in the market. This will be the BAU case. Solve for the equilibrium and enter the results in the BAU column in the Results section.
8. Finally, suppose the government is considering setting the tax to zero. Solve for that equilibrium and enter it into the Policy column in the Results section.
9. Save and submit your spreadsheet.