Suppose that the inverse aggregate supply function for a good is P^s(q) = 7 + 4q and the inverse aggregate demand function is P^d(q) = 214 - 5q. Suppose that the market for the good is perfectly competitive.
i) Solve for the equilibrium price and quantity.
ii) Now, suppose that the government places a $36 per unit tax on consumers of the good. What is thenew equilibrium price received by suppliers, the new equilibrium price paid by demanders, and the newequilibrium quantity? What are the government’s revenues? What is the deadweight loss to society ofthe tax?