8. ADVANCED ANALYSIS Suppose the equation for the demand curve for some product X is P 5...
Question:
8. ADVANCED ANALYSIS Suppose the equation for the demand curve for some product X is P 5 8 2 .6 Q and the supply curve is P 5 2 1 .4 Q . What are the equilibrium price and quantity? Now suppose an excise tax is imposed on X such that the new supply equation is P 5 4 1 .4 Q .
How much tax revenue will this excise tax yield the government?
Graph the curves, and label the area of the graph that represents the tax collection “TC” and the area that represents the efficiency loss of the tax “EL.” Briefly explain why area EL is the efficiency loss of the tax but TC is not. LO3
Step by Step Answer:
Related Book For
Economics Principles Problems And Policies
ISBN: 9780073511443
19th Edition
Authors: Campbell Mcconnell ,Stanley Brue ,Sean Flynn
Question Posted: