The demand curve for salted codfish (saltfish) is D(p) = 200 − 5p and the supply curve is S(p) = 5p.
(a) On a graph with saltfish on the horizontal axis and the price of saltfish on the virtical, draw the demand and supply curves. What is the equilibrium price? What is the equilibrium quantity sold?
(b) A quantity tax t = 2 per unit sold is placed on saltfish. On the same graph draw the new supply curve. (The price on the vertical axis remains the price paid by the demanders.) What is the new equilibrium price paid by the demanders? What is the new price received by the suppliers? What is the equilibrium quantity sold?
(c) On your graph, shade in the area that represents the deadweight loss. Calculate the deadweight loss.