IMPACT OF GOVERNMENT TAX ON SUPPLY AND DEMAND {PROBLEM 2}:-

GIVEN EQUATION FOR RETAIL PETROL MARKET

QD = 100-2PC AND QS = 3PS.
We are calculating the impact due to ad valorem tax of 10% on selling price.
The equilibrium price and quantity will be same as above question =20 and 60.
But here PC=1.1 PS.
Qd = 100-2(1.1PS) AND QS = 3PS
PS = 19.23 & PC =21.153 AND QS = 57.69.

In the above price v/s supply curve the rectangular part shows the tax revenue collected by
the government.
Economic incidence of tax on supplier = -0.77 and on consumer = 1.153.

Dead weight loss (DWL) :- A deadweight loss is a cost to society created by market
inefficiency, which occurs when supply and demand are out of equilibrium.