What is the equilibrium quantity before the tax?

Question

What is the equilibrium quantity before the tax?

BlackTom AI · Accepted Answer

The question asks for the equilibrium quantity before the tax.
First, identify the market conditions before any tax is imposed. In the diagram, the initial supply curve is labeled S1 and the demand curve is D. The pre-tax equilibrium occurs at the point where these two curves intersect, because at that point the quantity supplied equals the quantity demanded.
Next, read the coordinates of that intersection from the graph. The intersection of D and S1 occurs at a quantity of 100 units on the horizontal axis and at a price around 10 on the vertical axis.
Therefore, the equilibrium quantity before the tax is the quantity at that intersection, which is 100.
If you look at the dashed vertical line and the labeled tick marks, the 100 quantity aligns with the pre-tax intersection, confirming that 100 is the correct pre-tax equilibrium quantity.
Note: The presence of a second supply curve, S2, represents the tax effect shifting supply, but that shift occurs after tax and does not determine the pre-tax equilibrium quantity. The pre-tax equilibrium is determined solely by the intersection of D and S1 at Q = 100.

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What is the equilibrium quantity before the tax?

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BECO011 Week 3 Practice quiz

What is the equilibrium quantity before the tax?

View Explanation

Log in for full answers

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Making Your Study Simpler

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