Assume that at a price of $12 per pound, the quantity of cashews demanded is 50 pounds.
Question:
Assume that at a price of $12 per pound, the quantity of cashews demanded is 50 pounds. Now assume that the government imposes an excise tax on cashews of $3 per pound. Draw a graph showing demand when consumers are relatively responsive to the tax and quantity demanded falls by 40 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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Related Book For
Mylab Economics With Pearson Access Code For Principles Of Microeconomics
ISBN: 9780135197141,9780135197103
13th Edition
Authors: Karl E. Case; Ray C. Fair; Sharon E. Oster
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