Problem
Suppose that the demand in this market is given by P = 22 - Q
while supply is given by P = 5Q + 10.
i. Compute the equilibrium quantity and price before and after the 10% tax, assuming that the tax is imposed on sellers. Note that, since the tax is a percentage, the supply curve with the tax is P = (5Q + 10) × (1 + tax) where tax=0.1. Graphically show the equilibrium.
ii. Compute the efficiency-loss ratio for this tax, the buyers' share of the tax and the sellers' share of the tax.