# Understanding the Implications of Taxes on WelfareThe following graph represents the demand and supply for pinckneys (an imaginary product). The black point (plus symbol) indicates the pre-tax equilibrium. Suppose the government has just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario.## Graph Explanation### Axes:- **Vertical Axis (Y-axis):** Represents the price in dollars per pinckney.- **Horizontal Axis (X-axis):** Represents the quantity of pinckneys.### Lines:- **Demand Line:** Slopes downward from left to right.- **Supply Line:** Slopes upward from left to right.### Equilibrium Points:- **Pre-Tax Equilibrium:** Indicated by a black plus symbol at the intersection of the demand and supply lines.- **Post-Tax Scenario:** Indicated by two grey star symbols. - The star on the demand line reflects the price buyers pay after the tax. - The star on the supply line reflects the price sellers receive after the tax.### Price and Quantity:- **Pre-Tax Equilibrium Price and Quantity:** Occurs at $9.00 and a quantity of 14 pinckneys.- **Post-Tax Changes:** - Buyers pay $11.00 per pinckney. - Sellers receive $7.00 per pinckney. - The quantity decreases to 9 pinckneys.### Shaded Areas:- **A (Purple Area):** Represents the loss of consumer surplus due to the tax.- **B (Green Area):** Represents the tax revenue gained.- **C (Yellow Area):** Represents the reduced consumer surplus remaining after tax.- **D (Orange Area):** Represents the loss in producer surplus.- **E (Beige Area):** Represents the reduced producer surplus remaining after tax.- **F (Pink Area):** Represents the deadweight loss resulting from the tax, highlighting inefficiencies introduced by the tax.This graphical representation helps visualize the economic impact of taxes on both producers and consumers, showing changes in price, quantity, and surplus distributions. Complete the following table, given the information presented on the graph.| Result | Value ||-----------------------------------------|--------------------|| Per-unit tax | $ || Price consumers pay before tax | $ || Equilibrium quantity before tax | |In the following table, indicate which areas on the previous graph correspond to each concept. Check all that apply.| Concept | A | B | C | D | E | F ||-------------------------------------------------|----|----|----|----|----|----|| Consumer surplus before the tax is imposed | ☐ | ☐ | ☐ | ☐ | ☐ | ☐ || Deadweight loss after the tax is imposed | ☐ | ☐ | ☐ | ☐ | ☐ | ☐ || Producer surplus after the tax is imposed | ☐ | ☐ | ☐ | ☐ | ☐ | ☐ |

1. Understanding the implications of taxes on welfare The following graph represents the demand and supply for pinckneys (an imaginary product). The black point (plus symbol) indicates the pre-tax equilibrium. Suppose the government has just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario. PRICE (Dollars per pinckney) 11.00 9.00 7.00 Demand T " A B D F 10 E 18,9 18 Supply (?

1. Understanding the implications of taxes on welfare The following graph represents the demand and supply for pinckneys (an imaginary product). The black point (plus symbol) indicates the pre-tax equilibrium. Suppose the government has just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario. PRICE (Dollars per pinckney) 11.00 9.00 7.00 Demand T " A B D F 10 E 18,9 18 Supply (?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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