Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose the weekly demand for cigarettes(in thousands of packs) is given by ()=9020 D(p)=90-20p and supply is given by ()=10 S(p)=10p and suppose there is

Suppose the weekly demand for cigarettes(in thousands of packs) is given by ()=9020 D(p)=90-20p and supply is given by ()=10 S(p)=10p and suppose there is a tax of 3$ per pack. a) (5 points) Find the equilibrium in the market for cigarettes before and after-tax is implemented. b) (15 points) Show your answer in a supply and demand diagram. Include after-tax, consumer surplus, producer surplus, tax revenue, and deadweight loss. c) (5 points) How is the tax incidence affected by the elasticity of demand? Explain. d) (Extra credit 5 points). Inelastic goods like cigarettes tend to be more heavily taxed than elastic goods. Explain based on economic analysis why this is the case

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Data Analysis And Decision Making

Authors: Christian Albright, Wayne Winston, Christopher Zappe

4th Edition

538476125, 978-0538476126

Students also viewed these Economics questions