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The market for truck hoods is perfectly competitive. The current equilibrium price is $500 and 80 units are sold per day. Suppose the own price elasticity of demand is -0.4 and the price elasticity of supply is 1.5, and both demand and supply curves are linear.

a. Derive the linear demand and supply functions.

b. If the local government imposes a per unit tax of $25 per unit to the producers, what would be the new equilibrium price and quantity?

c. Would a per unit tax on hoods change the revenue received by the factory?

Business Management, Management Studies

  • Category:- Business Management
  • Reference No.:- M93135290
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