The demand and supply functions for hockey sticks are given by
QD = 286 – 20p
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QS = 88 + 40p
In order to raise revenue to finance minor hockey so that Canada can continue its gold medal streak at the Olympics, the federal government decides to impose a tax of $2 per hockey stick sold, to be paid by the buyers of hockey sticks.
a) Determine the equilibrium price and quantity of hockey sticks both before and after tax. How is the burden of the tax shared between buyer and seller?
b) How many hockey sticks would be sold before the tax is imposed? After the tax?
c) Graph the supply and the demand curves for hockey both before and after the tax clearly showing the intercepts and equilibrium outcomes.
d) What would happen if the sellers of hockey sticks instead of the buyers paid the tax?