2. Taxes and welfare Consider the market for commercial fans. The following graph shows the demand and supply for commercial fans before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of commercial fans in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilbrium price. Next, use the purple point (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price. Before Tax 150 135 Equilibrium Demand 120 105 Consumer Surplus 90 75 Producer Surplus 60 45 Supply 30 15 100 90 70 10 20 30 40 50 60 QUANTITY (Fans) PRICE (Dollars per fan) 80
2. Taxes and welfare Consider the market for commercial fans. The following graph shows the demand and supply for commercial fans before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of commercial fans in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilbrium price. Next, use the purple point (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price. Before Tax 150 135 Equilibrium Demand 120 105 Consumer Surplus 90 75 Producer Surplus 60 45 Supply 30 15 100 90 70 10 20 30 40 50 60 QUANTITY (Fans) PRICE (Dollars per fan) 80
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:2. Taxes and welfare
Consider the market for commercial fans. The following graph shows the demand and supply for commercial fans before the government imposes any
taxes.
First, use the black point (plus symbol) to indicate the equilibrium price and quantity of commercial fans in the absence of a tax. Then use the green
point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilbrium price. Next, use the purple point (diamond
symbol) to shade the area representing total producer surplus (PS) at the equilibrium price.
Transcribed Image Text:Before Tax
150
135
Equilibrium
Demand
120
105
Consumer Surplus
90
75
Producer Surplus
60
45
Supply
30
15
100
90
70
10
20
30
40
50
60
QUANTITY (Fans)
PRICE (Dollars per fan)
80
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