Please follow instructions carefully. (1) Homeworks should be typed or handwritten NEATLY. Sloppy, untidy homework assignments would be penalized. (2) Please write only on one side of the sheet and not on both sides. (3) Please circle or highlight your answers so that they are clearly legible. (4) All homeworks would be due back before class on Thursday, February 1, 2001. You can hand in the homework to me right before class. Or if you cannot make it to class then make sure you drop the homework off. You can leave it with one of the administrative assistants Wanda Walters (CIC 125A) or Karen Davis in the CIC building or put it in my mailbox. I will NOT accept late homework assignments. (5) Please DO NOT FORGET to write your name on your homework clearly.
In answering the questions and drawing please make sure that your writing is legible and the graphs are drawn neatly. It is VERY IMPORTANT that I can make out your writing or your drawing - sloppy, untidy homeworks will be penalized!
There are seven question - the first six are each worth 5 points and part 7 is worth 10 points - for a total of 40 points.
Consider the following demand curve: P 20 18 16 14 Q 0 1 2 3 and the following supply curve: P 2 3 4 5 Q 0 1 2 3 (1) What is the Equation of the Demand Curve? (2) What is the Equation of the Supply curve? (3) Solve for equilibrium price and quantity. Suppose a tax of $3 per unit is imposed on the sellers of the good. (4) What happens to the supply curve now? (5) Find the new equilibrium price and quantity after the tax? (6) How is the tax shared between producers and consumers - who pays how much? (7) Draw a NEAT digram showing the original demand curve, the original supply curve, the new supply curve, the original equilibrium and the new equilibrium.