QUANTITATIVE ECONOMICS

Question 3.2
In the market for chocolate bars, the demand function is Q D = 900 – 100P and the supply
function is Q S = 200P, where price is given in $ per chocolate bar and quantity is given in
thousands of chocolate bars per month. The government then imposes a specific tax of
$1.50 on chocolate bars, to discourage their sales.
Without using a graph, calculate, showing your working fully:
i. The original equilibrium price and quantity before the tax.
ii.
The new supply function, after the tax.
iii.
The new equilibrium price and quantity.
iv.
The change in consumer expenditure.
v. The change in producer revenue.
vi.
The government tax revenue.
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