(a) Derive an equation for the excess burden of a tax and explain all the factors that influence the size of deadweight loss that results from commodity taxation

(b) Derive an efficient commodity taxation rule (also known as inverse elasticity rule or Ramsey Rule) and interpret the results. Is there a tradeoff between efficiency and fairness?

(c) Now assume that there are two (unrelated) commodities x and y whose compensated price elasticities are _x=0.25 and _y=1 Suppose we know that , what should be the tax rate on commodity y?

(d) In addition to the information you get in (b), we know that before tax consumption of commodity y is 10 units at a pre-tax price $60. What is the excess burden associated with a commodity tax on y?