Last year, Berkeley, CA passed a tax on yoga classes of $4 per yoga class. Suppose that the pre-taxdemand for yoga classes is QD = 2000 â 100P, and that the pre-tax supply of yoga classes is QS = 300P â200.
(a) Calculate the initial equilibrium price and quantity.
(b) Calculate the elasticity of demand (ED) and elasticity of supply (ES) using calculus at the initialequilibrium price and quantity from Part (a).
(c) Use your answer from Part (b) to calculate the tax borne by consumers, as a percentage of the overalltax.
(d) Use your answer from Part (b) to calculate the tax borne by firms, as a percentage of the overall tax.
(e) Determine the price that buyers will pay for yoga classes after the tax (PB). Determine the price thatfirms will receive for yoga classes after the tax (PS).
(f) Calculate the deadweight loss (DWL) associated with this tax.
Last year, Berkeley, CA passed a tax on yoga classes of $4 per yoga class. Suppose that the pre-taxdemand for yoga classes is QD = 2000 â 100P, and that the pre-tax supply of yoga classes is QS = 300P â200.
(a) Calculate the initial equilibrium price and quantity.
(b) Calculate the elasticity of demand (ED) and elasticity of supply (ES) using calculus at the initialequilibrium price and quantity from Part (a).
(c) Use your answer from Part (b) to calculate the tax borne by consumers, as a percentage of the overalltax.
(d) Use your answer from Part (b) to calculate the tax borne by firms, as a percentage of the overall tax.
(e) Determine the price that buyers will pay for yoga classes after the tax (PB). Determine the price thatfirms will receive for yoga classes after the tax (PS).
(f) Calculate the deadweight loss (DWL) associated with this tax.
, solve for deadweight loss as a function of T. 