Suppose there is a market that has market demand characterized as X = 30 - P/3. Suppose further that market supply can be written as X = P/2 - 2.

(A) Find the equilibrium price and quantity in this market.
(B) If a unit tax of $16 is imposed on good X, what are the equilibrium price, quantity, and tax
revenue in the market?
(C) Suppose an ad valorem tax of 30 percent is imposed on good X. The after-tax demand equation would be X = 30 - P/2. Now find the equilibrium price, quantity, and tax revenue in
the market.
(D) What can be said about the amount of tax revenue generated under each taxing scheme,
and why?

(A) Setting supply equal to demand and solving yields P* = $38.4 and X* = 17.2.
(B) The after-tax demand curve is now P = 74 - 3X. Setting after-tax demand equal to supply
yields X* = 14, P* = $32 for suppliers, and P* = $48 for consumers. Tax revenue is $224.
(C) Setting the given after-tax demand equal to supply yields P* = $32 for suppliers and P* =
$48 for consumers. Tax revenue is $224.
(D) The tax revenue and prices are the same using either taxing scheme.