Consider the market for commercial fans. The following graph shows the demand and supply for commercial fans before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of commercial fans in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price. Suppose the government imposes an excise tax on commercial fans. The black line on the following graph shows the tax wedge created by a tax of $50 per fan. First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbol) to shade the area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representing total producer surplus after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss. Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax, and consumer surplus, producer surplus, tax revenue, and deadweight loss after the tax. Note: You can determine the areas of different portions of the graph by selecting the relevant area.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter4: Markets In Action

Section: Chapter Questions

Problem 12SQ

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Consider the market for commercial fans. The following graph shows the demand and supply for commercial fans before the government imposes any taxes.

First, use the black point (plus symbol) to indicate the equilibrium price and quantity of commercial fans in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price.

Suppose the government imposes an excise tax on commercial fans. The black line on the following graph shows the tax wedge created by a tax of $50 per fan.

First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbol) to shade the area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representing total producer surplus after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss.

Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax, and consumer surplus, producer surplus, tax revenue, and deadweight loss after the tax.

Note: You can determine the areas of different portions of the graph by selecting the relevant area.

First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbol) to shade the
area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representing total producer
surplus after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss.
After Tax
250
225
Tax Revenue
200
Demand
175
150
Consumer Surplus
125
Tax Wedge
100
Producer Surplus
Supply
75
50
Deadweight Loss
25
80
160
240
320
400
480
580
640
720
800
QUANTITY (Fans)
Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax, and consumer
surplus, producer surplus, tax revenue, and deadweight loss after the tax.
Note: You can determine the areas of different portions of the graph by selecting the relevant area.
Before Tax
After Tax
(Dollars)
(Dollars)
Consumer Surplus
Producer Surplus
Tax Revenue
Deadweight Loss
PRICE (Dollars per fan)

Consider the market for commercial fans. The following graph shows the demand and supply for commercial fans before the government imposes any
taxes.
First, use the black point (plus symbol) to indicate the equilibrium price and quantity of commercial fans in the absence of a tax. Then use the green
point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamond
symbol) to shade the area representing total producer surplus (PS) at the equilibrium price.
Before Tax
250
225
Equilibrium
200
Demand
175
150
Consumer Surplus
125
100
Producer Surplus
Supply
75
50
25
80
180
240
320
400
480
50
640
720
800
QUANTITY (Fans)
Suppose the government imposes an excise tax on commercial fans. The black line on the following graph shows the tax wedge created by a tax of
$50 per fan.
PRICE (Dollars per fan)

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