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7. The demand curve for ski lessons is given by D() = 100 2and the supply curve is given by S() = 8.
(a) What is the equilibrium price? _______What is the equilibrium quantity? _______
(b)A tax of $10 per ski lesson is imposed on consumers. Write an equation that relates the price paid by demanders to the price received by suppliers. __________Write an equation that states that supply equals demand. ____________
(c) Solve these two equations for the two unknowns and . With the $10 tax, the equilibrium price paid by consumers would be _________ per lesson. The total number of lessons given would be _____________.
(d) A senator from a mountainous state suggests that although ski lesson consumers are rich and deserve to be taxed, ski instructors are poor and deserve a subsidy. He proposes a $6 subsidy on production while maintaining the $10 tax on consumption of ski lessons. Would this policy have any different effects for suppliers or for demanders than a tax of $4 per lesson? _________
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