Suppose you are hired by the Martin Guitar Company as an economic consultant. You estimate the demand to be Q=8000-2P. Suppose the supply of Martin Guitars is given by Q= -2000+3P. Suppose a per-unit excise tax of $40 per guitar 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 Martin guitars?
What percent of the tax will be paid by the suppliers of Martin guitars?
How many guitars 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?