Assume that at a price of $5 per pound, the quantity of coffee demanded is 20 pounds.

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Assume that at a price of $5 per pound, the quantity of coffee demanded is 20 pounds. Now assume that the government imposes an excise tax on coffee of $2 per pound. Draw a graph showing demand when consumers are relatively responsive to the tax and quantity demanded falls by 50 percent, and when consumers are relatively nonresponsive to the tax and quantity demanded falls by 10 percent. Calculate the amount of the excess burden of this tax for each situation and show this on the graph.

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Principles Of Economics

ISBN: 9780593183540

10th Edition

Authors: Case, Karl E.;Oster, Sharon M.;Fair, Ray C

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