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wrote...
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A year ago
Suppose the market for grass seed can be expressed as

Demand: QD = 100 - 2p
Supply: QS = 3p

At the market equilibrium, calculate the price elasticities of supply and demand. Use these numbers to predict the change in price resulting from a specific tax.
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Microeconomics
Edition: 6th
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A year ago
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At p = 20 Q = 60, e = -2 * (20/60) = -0.67. n = 3 * (20/60) = 1.
The change in price resulting from a specific tax = [n/(n - e)] * tax = [1/1.67] * tax = 0.6 * tax.
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