A market for baby bottles has the following supply and demand functions qS = 6 + 3p qD = 14 2p
(a) What are the equilibrium price and quantity in this market?
(b) Calculate the Consumer Surplus, Producer Surplus, and Total Welfare levels. 2
(c) Now, suppose a per unit tax of 5 were charged to the buyer. What are the equilibrium quantity, price paid by the buyer, and price received by the seller?
(d) Mathematically, does it make a di§erence if the tax is applied to the buyer or the seller? Explain why or why not.
(e) How much tax revenue is raised? How much of that tax burden is borne by the buyer?