16.3 (0) The demand curve for ski lessons is given by D(p) = 100-2pp and the sup

Question

16.3 (0) The demand curve for ski lessons is given by D(p) = 100-2pp and the supply curve is given by S(PS) = 3ps. (a) What is the equilibrium price?What is the equilibriu quantity? (b) A tax of S10 per ski lesson is imposed on consumers. Write an equation that relates the price paid by demanders to the price received by suppliers. Write an equation that states that supply equals demand (c) Solve these two equations for the two unknowns ps and pp. With the $10 tax, the equilibrium price po paid by consumers would be per lesson. The total number of lessons given would be (d) A senator from a mountainous state suggests that although ski lesson consumers are rich and deserve to be taxed, ski instructors are poor and deserve a subsidy. He proposes a $6 subsidy on production while main- taining the $10 tax on consumption of ski lessons. Would this policy have any different effects for suppliers or for demanders than a tax of $4 per lesson?

Explanation / Answer

At equilibrium demand equals supply. 100 - 2p = 3p

100 = 5p

P = 20

Q = 3*20 = 60

Tax on consumers changes demand equation to 100 - 2(p+10)

D = 100 - 20-2p

D = 80-2p

Supply equals demand equation, 80-2p = 3p

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