Question Given a demand curve of P = 31 - 1.25Q and a supply curve of P= 4 +Q, with a tax of 18, solve for the resulting deadweight loss. Solution To solve this problem, you need to solve both for q* without the tax (12) and for q' with the tax (4). Then, the deadweight loss (DWL) is a triangle with base, q* - q* (8), and height equal to the tax, t (18). In this problem, the procedure yields DWL = 72. %3!
Question Given a demand curve of P = 31 - 1.25Q and a supply curve of P= 4 +Q, with a tax of 18, solve for the resulting deadweight loss. Solution To solve this problem, you need to solve both for q* without the tax (12) and for q' with the tax (4). Then, the deadweight loss (DWL) is a triangle with base, q* - q* (8), and height equal to the tax, t (18). In this problem, the procedure yields DWL = 72. %3!
Principles of Economics (MindTap Course List)
8th Edition
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter8: Application: The Cost Of Taxation
Section: Chapter Questions
Problem 4CQQ
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