A. The market for soda has demand and supply curves given by
P =3-0.01Qd
P = 0.02Qs
1. Provide the graph for the demand and supply curves.
2. Calculate the equilibrium price and the quantity for sodas?
3. Determine the numbers of units of soda will be traded if the government imposes a price floor of $2.50? Discuss what about if the government imposes a price ceiling of $0.80?
B. Assume the government put a tax on soda of $0.50 per can to be paid by consumers. Graph the before and after tax supply and demand curves. Determine the new equilibrium price and the quantity?