2. Taxes and welfare Consider the market for electric scooters. The following graph shows the demand and supply for electric scooters before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of electric scooters 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. PRICE (Dollars per scooter) 100 90 Demand 80 70 60 50 40 28 84 8 30 Supply 20 10 0 0 160 320 480 Before Tax 640 800 960 1120 1280 1440 1600 QUANTITY (Scooters) Equilibrium A Consumer Surplus Producer Surplus

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2. Taxes and welfare
Consider the market for electric scooters. The following graph shows the demand and supply for electric scooters before the government imposes any
taxes.
First, use the black point (plus symbol) to indicate the equilibrium price and quantity of electric scooters 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.
PRICE (Dollars per scooter)
100
90
Demand
80
70
60
50
40
28 84 8
30
Supply
20
10
0
0
160
320 480
Before Tax
640 800 960 1120 1280 1440 1600
QUANTITY (Scooters)
Equilibrium
A
Consumer Surplus
Producer Surplus
Transcribed Image Text:2. Taxes and welfare Consider the market for electric scooters. The following graph shows the demand and supply for electric scooters before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of electric scooters 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. PRICE (Dollars per scooter) 100 90 Demand 80 70 60 50 40 28 84 8 30 Supply 20 10 0 0 160 320 480 Before Tax 640 800 960 1120 1280 1440 1600 QUANTITY (Scooters) Equilibrium A Consumer Surplus Producer Surplus
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