Description
1) Demand for parking in the City of Chambana is given by Qd = 180 – 0.5P, and the supply is Qs= P – 60, where price is in cents per car per day and quantity is in hundreds of cars parked per day.
A) Draw a graph of the given demand and supply curve and label it as D0 and S0.
B) Indicate numerically all relevant intercepts for your demand and supply curves on your graph.
C) Find the short run equilibrium price and quantity in this market and label the numbers you found on the graph.
D) State your equilibrium price and quantity under your graph; be careful in correctly using the units of measurement indicated in the directions for this question.
Now, suppose that in order to fund improvements to the city’s parking garage, the city institutes a tax of 30 cents per unit of parking sold.
E. Depict the effect of the tax by drawing an effective supply curve and label it as S1. Clearly show the direction of the shift and label the exact dollar amount by which it shifts.
F. Indicate numerically all relevant intercepts for your demand and supply curves on your graph.
G. Find the equilibrium price consumers pay, price producers receive, and quantity traded after the tax is imposed and label them on the graph.
H. State your equilibrium price consumers pay, price producers receive, and quantity traded after the tax is imposed under your graph; be careful in correctly using the units of measurement indicated in the directions for this question.
I. What is the incidence of the tax on consumers and producers? Please show the incidence graphically.
Upload a single MS Word, Adobe PDF, or graphics file (JPEG, TIFF, PNG, BMP only) that does not exceed 5MBs with a graph as an answer to this question.
Question 2)
Consider the situation from Question 1; and provide a narrative interpretation of items below:
Consider your graphical depiction of tax incidence from item 8(I). Which one (consumer or producer incidence) is relatively larger, and why?
How much total revenue for the City of Chambana government does the tax generate per day?
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