Suppose the market for laser pointers consists of 2 types of people. Professors use laser pointers to indicate Important elements on slides and cat lovers use lase pointers to entertain their cats. Each proiessor has an Individual demand of (mo! = 8 — iP and each at lover has anIndividual demand of 9001 = 20 — P. a) (4 marks) If there are 25 consumers with a demand oi (131,! and 15 consumers with a demand at go… then what is the market demarkt cum(for all 40 people)? Illustrate It in a graph. Make sure to label your graph. b) (5. marks) Suppose the (inverse) market supply curve Is P = 516 Q, what is the market equilibrium outcome? (Hint: Both groups buy laser pointers and your quantity should be somewhere between 200 and 275.) What is the consumer and producer surplus In this use? (Reminder.Your consumer surplus will be ugly to calculate since the demand curve is discontinuous). c) (5 marks) The government has become concerned about long term environmental harm from improper disposal of the laser pointers. Toalleviate some of the burden, the government decides to impose a $5 excise tax on each laser pointer sold. What is the new equilibrium? Howmuch has the gavernment raised In tax revenue? How big is the dead weight loss? ScannedWIthCam+Scanner Drag and drop your ﬁles or click to browse…
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