BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

Solutions

Chapter
Section
BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

Draw a supply-and-demand diagram with a tax on the sale of a good. Show the deadweight loss. Show the tax revenue.

To determine
The deadweight loss due to tax.

Explanation

The tax is the unilateral payment from the people to the government. Tax is the main source of income of the government which can be used for carrying on the public expenditure of the government. The main types of taxes include the income tax, wealth tax and the professional tax. When there is a tax, it will lead to fall in the consumer surplus as well as in the producer surplus. As a result, the total surplus which is the summation of the consumer surplus and the producer surplus will fall and this fall will occur in the total surplus due to taxation which is known as the deadweight loss due to tax. The impact of the tax on the commodity can be illustrated as follows:

From the above graph we can identify that without tax equilibrium is obtained at the point where the demand curve and the supply curve intersect with each other...

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

In what ways is economics a science?

Principles of Macroeconomics (MindTap Course List)

Define (a) sensitivity analysis, (b) scenario analysis, and (c) simulation analysis. If GE were considering two...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)