Complete the table below by filling in ALL missing numbers. If your answer is a

Question

Complete the table below by filling in ALL missing numbers. If your answer is a decimal rather than a whole number, round your answer to the nearest 1 decimal place (the nearest tenth). Also, do not enter leading zeroes. For example, if the answer to a field is 1/8, enter .1 Do not enter .125 or 0.13 or 0.1

Consider the market for laptop computers. The demand for laptops is Q = 1800 – 3P. Suppose the supply of laptops is given by Q = –200 +2P.

What is the equilibrium price of laptops?
What is the equilibrium quantity of laptops?
What is the price elasticity of demand at the equilibrium price and quantity?
What is the price elasticity of supply at the equilibrium price and quantity?

Suppose a per-unit excise tax of $80 per laptops is levied on the consumers.

What price will sellers receive after the tax is levied?

What price will consumers pay after the tax is levied?

What percent of the tax will be paid by the consumers of laptops?(give an answer between 0 and 100)

What percent of the tax will be paid by the suppliers of laptops? (give an answer between 0 and 100)

How many laptops will be sold after the tax is imposed?

How much consumer surplus do consumers get after the tax?

What is the deadweight loss created by this tax?

Explanation / Answer

Question

(a)

Demand function is as follows -

Q = 1,800 - 3P

Supply function is as follows -

Q = -200 + 2P

In equilibrium, demand equals supply

1,800 - 3P = -200 + 2P

5P = 2,000

P = 400

So,

The equilibrium price of laptops is $400 per laptop.

(b)

The equilibrium value of P can be used in either demand function or supply function to ascertain the equilibrium value of Q.

Q = 1,800 - 3P = 1,800 - (3*400) = 1,800 - 1,200 = 600

So,

The equilibrium quantity of laptops is 600 laptops.

(c)

Equilibrium price, P = $400

Equilibrium quantity, Q = 600

Calculate the first derivative of demand function -

Q = 1,800 - 3P

dQ/dP = d(1,800 - 3P)/dP = -3

Calculate the elasticity of demand -

Ed = (dQ/dP) * (P/Q) = -3 * (400/600) = -2

So,

The price elasticity of demand at the equilibrium price and quantity is -2.

(d)

Equilibrium price, P = $400

Equilibrium quantity, Q = 600

Calculate the first derivative of supply function -

Q = -200 + 2P

dQ/dP = d(-200 + 2P)/dP = 2

Calculate the elasticity of supply -

Es = (dQ/dP) * (P/Q) = 2 * (400/600) = 1.33

So,

The price elasticity of supply at the equilibrium price and quantity is 1.33.

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