Consider the market for pizza in Middleton, Ontario, whose demand and supply schedules are given in the table below.
Price of Pizza ($) Quantity Demanded Quantity Supplied
10 0 6
9 1 5
8 2 4
7 3 3
6 4 2
5 5 1
4 6 0
3 7 0
2 8 0
1 9 0
a. Graph the demand and supply curve.
b. What is the consumer surplus and producer surplus?
c. Suppose the government were to impose a sales tax of $4 per pizza. What is the quantity of pizza bought and sold after the imposition of the tax? What is the consumer price? What is the price producers receive?
d. What is the consumer surplus and producer surplus after the imposition of the tax? By how much have consumer surplus and producer surplus each changed?
e. How much tax revenue does this tax generate for the government?