The effects of taxing elastic good on consumer surplus, producer surplus , tax revenue and dead weight loss.

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Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 5, Problem 6QFR

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The effects of taxing elastic good on consumer surplus, producer surplus, tax revenue and dead weight loss.

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In a particular market, the supply is elastic and demand is inelastic. If a tax is imposed on the sellers, what will happen to the equilibrium price and output? Who will bear a greater burden of the tax and why? Explain and illustrate. Graphically show the tax burdens, the change in producers surplus and consumers surplus as well as the deadweight loss due to the tax.

Suppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.8 and 0.7 respectively. Suppose the government imposes a per-unit tax of $45 Some economists believe that a sales tax, in general, is undesirable. Explain. Despite this, why do most countries still impose a tax on cigarette? Explain plausible arguments.

Consider the market for BP gasoline. If the market has a very elastic supply and a very inelastic demand, how would the burden of a tax on BP gasoline be shared between producers and consumers? Draw a graph to support your answer.

Answer 2

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Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 5, Problem 6QFR

To determine

The effects of taxing elastic good on consumer surplus, producer surplus, tax revenue and dead weight loss.

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Answer 3

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 5, Problem 6QFR

To determine

The effects of taxing elastic good on consumer surplus, producer surplus, tax revenue and dead weight loss.

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Answer 4

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 5, Problem 6QFR

To determine

The effects of taxing elastic good on consumer surplus, producer surplus, tax revenue and dead weight loss.

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Answer 5

Chapter 5, Problem 6QFR

To determine

The effects of taxing elastic good on consumer surplus, producer surplus, tax revenue and dead weight loss.

Answer 6

Chapter 5, Problem 6QFR

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The effects of taxing elastic good on consumer surplus, producer surplus, tax revenue and dead weight loss.

Answer 7

Chapter 5, Problem 6QFR

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The effects of taxing elastic good on consumer surplus, producer surplus, tax revenue and dead weight loss.

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Answer 11

Ch. 5 - Prob. 1QFR Ch. 5 - Prob. 2QFR Ch. 5 - Prob. 3QFR Ch. 5 - Prob. 4QFR Ch. 5 - Prob. 5QFR Ch. 5 - Prob. 6QFR Ch. 5 - Prob. 7QFR

The effects of taxing elastic good on consumer surplus, producer surplus , tax revenue and dead weight loss.

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The effects of taxing elastic good on consumer surplus, producer surplus, tax revenue and dead weight loss.

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