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Consider a perfectly competitive market for a good with the following supply and demand curves: QD = 400 – P QS = 80 + 4P Suppose the demand curve…

Consider a perfectly competitive market for a good with the following supply and demand curves:QD = 400 – PQS = 80 + 4PSuppose the demand curve changes to:QD’ = 376 – 0.6Pb) First, verify that the pre-tax equilibrium is approximately the same with this new demand curve. By how much does quantity change when a $10 tax is imposed on consumers? Based on this answer, what should happen to the deadweight loss (relative to part a)? Calculate the value of deadweight loss with the new demand curve to verify your intuition about the answer to the previous question.***(Already answered today, Part a) was:Calculate the change in equilibrium quantity, and the size of the deadweight loss that will result if a unit tax of $10 is imposed on consumers of this good. Draw a graph that illustrates how you arrived at your answer.)***Only b) needs to be answered now. Thanks.***

In the absence of any tax:In equilibrium: demand = supply⇒ 376 – 0.6P = 80 + 4P ⇒ P* = 64.35 ≅ 64Therefore, Q* = 376 – (0.6*64.35) = 337.4 ≅ 336 As a unit tax of $10 on the…

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