Question: Suppose the quantity of steak purchased by the consumers is 4 kilos per year when the price is $10 per kilo and 2 kilos per year when the price is $20 per kilo.

1. Calculate the price elasticity of demand and derive the demand equation for the market.
2. Suppose the supply equation is P= -10+5Q. Find the market equilibrium price and equilibrium quantity.
3. Given the above supply and demand equations, calculate the surpluses for both consumer and producer.
4. Let assume that Government has imposed a fixed tax of $4 per unit on sellers then what will be the new supply equation? Do you think that the fixed tax policy leads to a more efficient outcome at equilibrium? Explain.

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