The impact of $5 tax on the ticket for match.

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Chapter 6, Problem 9PA

To determine

The impact of $5 tax on the ticket for match.

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Suppose that the supply of oil is elastic and demand for oil is inelastic. If the government taxes oil, who will bear most of the tax burden?

Relationship between tax revenues, deadweight loss, and demand elasticity The government is considering levying a tax of $120/unit of either leather jackets or smartphones. The supply curve for each of these two goods is identical, as you can see on each of the following graphs. The demand for leather jackets is shown by DL (on the first graph), and the demand for smartphones is shown by Ds (on the second graph) suppose the government taxes leather jackets. The following graph shows the annual supply and demand for this good. It also shows the supply curve (S+tax) shifted up by the amount of the proposed tax ($120 per jacket) on the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for leather jackets. Then use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax.

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