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Ebenezer Scrooge has just been elected the new President of Christmasland. As his first action he is thinking of introducing an excise (or commodity)
Ebenezer Scrooge has just been elected the new President of Christmasland. As his first action he is thinking of introducing an excise (or commodity) tax on Santa hats or Christmas lights. The demand and supply curves for both products are shown on the graphs below. Use the graphs to answer the questions that follow. You can move the graphs, but they will not be graded. Price of Santa Hats ($) Price of Christmas Lights ($) What would be the total deadweight loss of a $3 tax on Santa hats? 12 12 11 11 Supply Supply 10 10 Number 7 $0 5 4 Demand What would be the total deadweight loss of a $3 tax on Christmas lights? 3 2 2 Demand 1 1 O 100020003000400050006000700080009000000 o 10002000300040005000600070008000900010000 Number Quantity Santa Hats Quantity Christmas Lights The deadweight loss for Santa hats and Christmas lights is different because the graph with the higher deadweight loss has a more... elastic demand curve. inelastic demand curve. inelastic supply curve. elastic supply curve. NO o tocNE
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