P = 200 - 3Q
P = 20 + Q
Question 1: How do I know which equation is supply and which is demand? How can I calculate the amount of shortage or surplus that would prevail at a price of $25 per unit? In terms of economic surplus, who gains and who loses?
Question 2: Using the same supply and demand equations, can you explain and determine graphically the effect on price and quantity of a tax of $20 per unit? And how can I also determine the following using graphs:
1) amount of tax revenue collected by the government
2) the distribution of tax payments between buyers and sellers
3) the indirect "welfare loss" of the tax.
4) Why are economists so concerned with welfare losses?
C) Using an isoquant map and a given input-price ratio, can you explain to me how to derive the long-run cost sruves of a firm?