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2. Taxes and welfare Consider the market for designer purses. The following graph shows the demand and supply for designer purses before the governme taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of designer purses in the absence of a tax. Then point (triangle symbol) to shade the area representing total consumer surplus (cs) at the equilibrium price. Next, use the purple poin symbol) to shade the area representing total producer surplus (PS) at the equilibrium price. Before Tax Demand 200 180 Equilibrium 180 A 140 120 Consumer Surplus 100 Supply 80 Producer Surplus 60 40 20 10 20 30 40 50 60 70 80 90 100 QUANTITY (Purses) Suppose the government imposes an excise tax on designer purses. The black line on the following graph shows the tax wedge create per purse. First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbo area representing total consunmer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representingt PRICE (Dollars per purse)

2. Taxes and welfare Consider the market for designer purses. The following graph shows the demand and supply for designer purses before the governme taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of designer purses in the absence of a tax. Then point (triangle symbol) to shade the area representing total consumer surplus (cs) at the equilibrium price. Next, use the purple poin symbol) to shade the area representing total producer surplus (PS) at the equilibrium price. Before Tax Demand 200 180 Equilibrium 180 A 140 120 Consumer Surplus 100 Supply 80 Producer Surplus 60 40 20 10 20 30 40 50 60 70 80 90 100 QUANTITY (Purses) Suppose the government imposes an excise tax on designer purses. The black line on the following graph shows the tax wedge create per purse. First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbo area representing total consunmer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representingt PRICE (Dollars per purse)

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider the market for designer purses. The following graph shows the demand and supply for designer purses before the government imposes any taxes.
 
2. Taxes and welfare Consider the market for designer purses. The following graph shows the demand and supply for designer purses before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of designer purses in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price. Before Tax Demand 200 180 Equilibrium 180 140 120 + Consumer Surplus 100 Supply 80 Producer Surplus 60 40 20 10 20 30 40 50 60 70 80 90 100 QUANTITY (Purses) Suppose the government imposes an excise tax on designer purses. The black line on the following graph shows the tax wedge created by a tax of $40 per purse. First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbol) to shade the area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representing total producer surplus after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss. After Tax PRICE (Dollars per purse)
Transcribed Image Text:2. Taxes and welfare Consider the market for designer purses. The following graph shows the demand and supply for designer purses before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of designer purses in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price. Before Tax Demand 200 180 Equilibrium 180 140 120 + Consumer Surplus 100 Supply 80 Producer Surplus 60 40 20 10 20 30 40 50 60 70 80 90 100 QUANTITY (Purses) Suppose the government imposes an excise tax on designer purses. The black line on the following graph shows the tax wedge created by a tax of $40 per purse. First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbol) to shade the area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representing total producer surplus after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss. After Tax PRICE (Dollars per purse)
area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representing total producer surplus after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss. After Tax Demand 200 180 Tax Revenue 160 140 120 Таx Wedge Consumer Surplus 100 Supply 80 Producer Surplus 60 40 Deadweight Loss 20 10 20 30 40 50 60 70 80 90 100 QUANTITY (Purses) Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax and of consumer surplus, producer surplus, tax revenue, and deadweight loss after the tax. Note: You can determine the areas of different portions of the graph by selecting the relevant area. Before Tax After Tax (Dollars) (Dollars) Consumer Surplus Producer Surplus Tax Revenue Deadweight Loss PRICE (Dollars per purse)
Transcribed Image Text:area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representing total producer surplus after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss. After Tax Demand 200 180 Tax Revenue 160 140 120 Таx Wedge Consumer Surplus 100 Supply 80 Producer Surplus 60 40 Deadweight Loss 20 10 20 30 40 50 60 70 80 90 100 QUANTITY (Purses) Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax and of consumer surplus, producer surplus, tax revenue, and deadweight loss after the tax. Note: You can determine the areas of different portions of the graph by selecting the relevant area. Before Tax After Tax (Dollars) (Dollars) Consumer Surplus Producer Surplus Tax Revenue Deadweight Loss PRICE (Dollars per purse)
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