1. The market for soda has supply and demand curves given by
P = 0.02Qs
P =3-0.01Qd
(A) Graph the demand and supply curves.
(B) What is the equilibrium price and quantity for sodas?
(C) How many units of soda will be traded if the government imposes a price floor of $2.50? What about if the government imposes a price ceiling of $0.80?
2. Returning to question 1, suppose 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. What is the new equilibrium price and quantity?