Question: Suppose the demand for cars is given by Q_d = 12 – P, and the supply of cars is given by $$\text{Qs }=\text{ 4P }\text{ 3}$$.

a) Find the equilibrium of this market and calculate the consumer and producer surpluses associated with this equilibrium.

b) Suppose that the government imposes a tax T = 5 that has to be paid by the buyers when buying a car. What is the new equilibrium quantity traded, together with the price paid by the buyers (PB) and the price received by the sellers (PS)?

c) Under the tax, what are the new consumer and producer surpluses, tax revenue and the dead-weight loss associated with the tax?

d) How much of the tax is paid by the consumers and the producers, respectively. How would your answer change if the tax would have been imposed on the sellers instead?