Question 3 – ALL CALCULATIONS MUST BE SHOWN

The government is considering imposing a new $100 tax per bicycle on sellers of bicycles to help pay for the introduction of new bicycle lanes in certain areas of the city. Information about the market for bicycles is shown in the following table where QD is quantity demanded, QS is quantity supplied and QS1 is quantity supplied inclusive of the $100 tax.

Price	QD	QS	QS1
0	120000	0	0
50	110000	0	0
100	100000	0	0
150	90000	10000	0
200	80000	20000	0
250	70000	30000	10000
300	60000	40000	20000
350	50000	50000	30000
400	40000	60000	40000
450	30000	70000	50000
500	20000	80000	60000
550	10000	90000	70000
600	0	100000	80000

a. Plot the data from the table above in a demand and supply diagram. Label clearly all demand and supply curves and all prices and quantities. 

b. What is the initial equilibrium price and quantity in the market for bicycles? 

c. What is the new equilibrium price and quantity following the imposition of the tax?

d. How much of the $100 tax is borne by the sellers of bicycles and how much is borne by consumers (i.e. purchasers of bicycles)? 

e. Calculate the tax revenue received by the government. 

f. Calculate the change in consumer surplus from the imposition of the tax.

g. Calculate the change in producer surplus from the imposition of the tax. 

h. Calculate the dead weight loss. 

Question 4 – ALL CALCULATIONS MUST BE SHOWN

The monthly market demand for tutoring services at a university is P=120-0.05Q and the monthly market supply of tutoring services is P=12+0.07Q where P is the price in dollars per hour and Q is the quantity of hours.

a. Suppose the market price of tutoring services is regulated at $60 per hour. Explain what type of policy this is and whether it is intended to assist tutors or students. 

b. What will be the quantity of hours of tutoring services demanded at the regulated price?

c. What will be the quantity of hours of tutoring services supplied at the regulated price? 

d. Illustrate on a demand and supply diagram the changes in areas of economic surplus resulting from the regulated price.