Relationship between tax revenues, deadweight loss, and demand elasticity The government is considering levying a tax of $120/unit of either leather jackets or smartphones. The supply curve for each of these two goods is identical, as you can see on each of the following graphs. The demand for leather jackets is shown by DL (on the first graph), and the demand for smartphones is shown by Ds (on the second graph) suppose the government taxes leather jackets. The following graph shows the annual supply and demand for this good. It also shows the supply curve (S+tax) shifted up by the amount of the proposed tax ($120 per jacket)on the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for leather jackets. Then use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. 240220S+TaxSupply200Tax Revenue180160Deadweight Loss1401201006040200 50 100 150 200 250 300 350 400 450 s00 s50 600QUANTITY (Phones)PRICE (Dollars per phone) Leather Jackets Market240220S+TaxSupply200Tax Revenue180160140Deadweight Loss120100D.200 50 100 150 200 250 300 350 400 450 500 660 600QUANTITY (Jackets)Instead, suppose the government taxes smartphones. The following graph shows the annual supply and demand for this good, as well as the supplycurve shifted up by the amount of the proposed tax ($120 per phone).On the following graph, do for smartphonies the same thing you did previously on the graph for leather jackets. Use the green rectangle (trianglesymbols) to shade the area that represents tax revenue for smartphones. Then, Use the black triangle (plus symbols) to shade the area thatrepresents the deadweight loss associated with the tax.PRICE IDolars per jacket)

a) For leather jackets : Tax revenue (green area) = 120 x 50 = $6,000 Deadweight loss (black area)…

Answered: 240 220 S+Tax Supply 200 Tax Revenue…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Relationship between tax revenues, deadweight loss, and demand elasticity

The government is considering levying a tax of $120/unit of either leather jackets or smartphones. The supply curve for each of these two goods is identical, as you can see on each of the following graphs. The demand for leather jackets is shown by DL (on the first graph), and the demand for smartphones is shown by Ds (on the second graph)

suppose the government taxes leather jackets. The following graph shows the annual supply and demand for this good. It also shows the supply curve (S+tax) shifted up by the amount of the proposed tax ($120 per jacket)

on the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for leather jackets. Then use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax.

240
220
S+Tax
Supply
200
Tax Revenue
180
160
Deadweight Loss
140
120
100
60
40
20
0 50 100 150 200 250 300 350 400 450 s00 s50 600
QUANTITY (Phones)
PRICE (Dollars per phone)

Leather Jackets Market
240
220
S+Tax
Supply
200
Tax Revenue
180
160
140
Deadweight Loss
120
100
D.
20
0 50 100 150 200 250 300 350 400 450 500 660 600
QUANTITY (Jackets)
Instead, suppose the government taxes smartphones. The following graph shows the annual supply and demand for this good, as well as the supply
curve shifted up by the amount of the proposed tax ($120 per phone).
On the following graph, do for smartphonies the same thing you did previously on the graph for leather jackets. Use the green rectangle (triangle
symbols) to shade the area that represents tax revenue for smartphones. Then, Use the black triangle (plus symbols) to shade the area that
represents the deadweight loss associated with the tax.
PRICE IDolars per jacket)

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