Suppose the demand and supply functions for milk are given by the equations: QD=200/P 30=-QS+5P * Calculate the equilibrium price and quantity of milk * Suppose the government introduces a per unit tax of $12, calculate the new equilibrium price and quantity * Produce a relevant sketch of answer (1) and (2) * calculate the share of tax born by the producer and the consumer * How much is the tax yield? * what is the fraction of tax borne by the consumer and the producer? * calculate the arc price elasticity of demand for (1) and (2) and interpret the results. What pricing policy is recommended?

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Suppose the demand and supply functions for milk are given by the
equations:

QD=200/P

30=-QS+5P

* Calculate the equilibrium price and quantity of milk
* Suppose the government introduces a per unit tax of $12, calculate
the new equilibrium price and quantity
* Produce a relevant sketch of answer (1) and (2)
* calculate the share of tax born by the producer and the consumer
* How much is the tax yield?
* what is the fraction of tax borne by the consumer and the producer?
* calculate the arc price elasticity of demand for (1) and (2) and
interpret the results. What pricing policy is recommended?

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