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Q3. For simplicity, supply curve is horizontal or price elasticity of supply (a) is innity. I.e., 8:00. P): is the price of X in Figure
Q3. For simplicity, supply curve is horizontal or price elasticity of supply (a) is innity. I.e., 8:00. P): is the price of X in Figure 3. When the government imposes a tax on supply side, the tax shifts the supply curve from Sx to 51;, and it raises Px to (1+tx)Px. Dx is the demand curve of X. Before the unit tax (fd), initial equilibrium is i. Answer the questions. You can use the symbols when you answer. Figure 3 Q3a. Write the excess burden using symbols in Figure 3, and explain why it is excess burden. Q31). Show that the excess burden is proportional to (compensated) price elasticity of demand (11) and the square of tax rate
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