Excise duty, subsidy and collective goods

• Economie
• Middelbare school
• vwo
• Leerjaar 3

Qd = - P + 8
Q s = 2 P - 4 (excluding excise duty)
Calculate the equilibrium price

Equilibrium price

Q s = Q d

2 P - 4 = - P + 8

+ 4          + 4

2 P = - P + 12

+ P             + P

3 P = 12

P = 4

Equilibrium price = 4
Q s = 2 P - 4
Q d = - P + 8
calculate the equilibrium quantity

Equilibrium price = 4

Q s = 2 P - 4

Q d = - P + 8

calculate the equilibrium quantity

Equilibrium price = 4

Q s = 2 P - 4

Q d = - P + 8

calculate the equilibrium quantity

p = 4 --> Q s = 2 x 4 - 4 = 4

p = 4 --> Q d = - 4 + 8 = 4

Q d = - P + 8
Q s =2 P - 8 (including excise tax)
Calculate the new price and quantity

Q d = - P + 8

Q s =2 P - 8 (including excise tax)

Calculate the new price and quantity

Q s = Q d 

2 P - 8 = - P + 8

+ 8          + 8

2 P = - P + 16

+ P           + P

3 P = 16

P = 5,33

P = 5,33 ---> - 5,33 + 8 = 2,67

Decrease as a percentage

(2,67 - 4)/ 4 X 100 % = - 33,3 %

Subsidy

Giving money to a supplier or consumer to lower the price of certain products

Museums

Solar panels

Football clubs

What is a pure collective good

1. Education
2. Security of a building
3. Milk
4. Making laws by the parliament

1

2

3

4

The governments finds the price of beer to low

The quantity of beer sold has been decreased

Excise tax is levied on beer

The price of a beer increases