Question
The problem deals with the concept of taxation authority in the Citaland. Study the following data for the demand and supply functions for tow goods
The problem deals with the concept of taxation authority in the Citaland. Study the following data for the demand and supply functions for tow goods - coffee and tea.
Coffee: Demand P=125-2Qd
Supply P=5+2Qs
Tea: Demand P=200-4Qd
Supply P=20+Qs
Using the following information, plot a demand and supply curves in both the coffee and tea market. Denote the consumer surpluses and the producers' surpluses.
Using the graph answer the following:
Overserving the plotted graph for the two market, which market has the lower price elasticity of the demand. further, in which market are consumer less sensitive to the changes in the price.
Determine the equilibrium price for both the tea and coffee markets.
Calculate the value of the consumer surplus and producer surpluses in the two markets.
Calculate the (CTI), (PTI), tax revenue and (DWL) for each of the option. In this case, plot a demand and supply curve for the two markets after the introduction of the tax and in the graph indicate the identified areas.
Based on the results in (c), determine whether it's true that the product can push the entire burden to the consumer.
Identify the option that the tax authority chooses to increase the tax revenue.
Which option should be selection so as to minimize the tax burden to the consumer?
The option to reduce the producer's burden.
To minimize the deadweight loss?
Determine if the results obtained those parts, hold if the tax burden was imposed direct the consumers side?
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