3. Relationship between tax revenues, deadweight loss, and demandelasticity The government is considering levying a tax of $100 per unit on suppliers 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 Dr (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 ($100 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. Leather Jackets Market ?
3. Relationship between tax revenues, deadweight loss, and demandelasticity The government is considering levying a tax of $100 per unit on suppliers 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 Dr (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 ($100 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. Leather Jackets Market ?
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter5: Elastic And Its Application
Section: Chapter Questions
Problem 6PA: The price of coffee rose sharply last month, while the quantity sold remained the same. Five people...
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![3. Relationship between tax revenues, deadweight loss, and demandelasticity
The government is considering levying a tax of $100 per unit on suppliers 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 D₁ (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 ($100 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.
PRICE (Dollars per jacket)
240
220
200
180
160
140
120
100
80
60
40
20
0
0
Leather Jackets Market
S+Tax
Supply
DL
50 100 150 200 250 300 350 400 450 500 550 600
QUANTITY (Jackets)
Tax Revenue
Deadweight Loss
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 ($100 per phone).](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe68fb1ae-fc32-4d84-ad25-16ca36cebf4d%2F5ef1deb6-62ed-4174-b8f8-4e71b47d43d2%2Fe035xja_processed.jpeg&w=3840&q=75)
Transcribed Image Text:3. Relationship between tax revenues, deadweight loss, and demandelasticity
The government is considering levying a tax of $100 per unit on suppliers 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 D₁ (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 ($100 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.
PRICE (Dollars per jacket)
240
220
200
180
160
140
120
100
80
60
40
20
0
0
Leather Jackets Market
S+Tax
Supply
DL
50 100 150 200 250 300 350 400 450 500 550 600
QUANTITY (Jackets)
Tax Revenue
Deadweight Loss
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 ($100 per phone).
![On the following graph, do for smartphones 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 (Dollars per phone)
240
220
200
180
160
140
120
100
80
60
40
20
0
Smartphones Market
S+Tax
Supply
0 50 100 150 200 250 300 350 400 450 500 550 600
QUANTITY (Phones)
If the Government Taxes...
Leather jackets at $100 per jacket
Smartphones at $100 per phone
Ds
smaller deadweight loss.
Tax Revenue
Complete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals.
Deadweight Loss
Tax Revenue Deadweight Loss
(Dollars)
(Dollars)
Suppose the government wants to tax the good that will generate more tax revenue at a lower welfare cost. In this case, it should tax
because, all else held constant, taxing a good with a relatively
elastic demand generates larger tax revenue and](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe68fb1ae-fc32-4d84-ad25-16ca36cebf4d%2F5ef1deb6-62ed-4174-b8f8-4e71b47d43d2%2Foihz6f_processed.jpeg&w=3840&q=75)
Transcribed Image Text:On the following graph, do for smartphones 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 (Dollars per phone)
240
220
200
180
160
140
120
100
80
60
40
20
0
Smartphones Market
S+Tax
Supply
0 50 100 150 200 250 300 350 400 450 500 550 600
QUANTITY (Phones)
If the Government Taxes...
Leather jackets at $100 per jacket
Smartphones at $100 per phone
Ds
smaller deadweight loss.
Tax Revenue
Complete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals.
Deadweight Loss
Tax Revenue Deadweight Loss
(Dollars)
(Dollars)
Suppose the government wants to tax the good that will generate more tax revenue at a lower welfare cost. In this case, it should tax
because, all else held constant, taxing a good with a relatively
elastic demand generates larger tax revenue and
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Follow-up Question
![Complete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals.
If the Government Taxes...
Leather jackets at $100 per jacket
Smartphones at $100 per phone
Tax Revenue
(Dollars)
smaller deadweight loss.
Deadweight Loss
(Dollars)
Suppose the government wants to tax the good that will generate more tax revenue at a lower welfare cost. In this case, it should tax
because, all else held constant, taxing a good with a relatively
elastic demand generates larger tax revenue and](https://content.bartleby.com/qna-images/question/e68fb1ae-fc32-4d84-ad25-16ca36cebf4d/d8084ae2-6807-4eea-9c84-b978d636bcda/2nel81a_thumbnail.jpeg)
Transcribed Image Text:Complete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals.
If the Government Taxes...
Leather jackets at $100 per jacket
Smartphones at $100 per phone
Tax Revenue
(Dollars)
smaller deadweight loss.
Deadweight Loss
(Dollars)
Suppose the government wants to tax the good that will generate more tax revenue at a lower welfare cost. In this case, it should tax
because, all else held constant, taxing a good with a relatively
elastic demand generates larger tax revenue and
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