Suppose that the demand curve for a particular commodity is Qd = a- bP and the supply curve for this
Suppose that the demand curve for a particular commodity is Qd = a- bP and the supply curve for this commodity is Qs = c+dP. The parameters a,b,c and d are positive constants.a. Find the equilibrium price and quantity as a function of the constants a,b,c and d.b. Impose a tax of $u per unit on this good. Show that the total amount paid by consumers will be the same regardless of whether the tax is imposed onproducers or consumers.a. At equilibrium, demand = supplyTherefore, Qd = Qs? a bP = c + dP? P* = (a c)/(b + d)Therefore, Q* = a b[(a c)/(b + d)] = (ab + bc)/(b + d) b. As a producers tax of…
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