### Tax on a Good with Perfectly Elastic DemandIn this exercise, we examine the effect of a tax on a good with perfectly elastic demand, which causes the supply curve to shift from $S1$ to $S2$.#### Instructions- Use the area tool to draw the triangle representing the producer surplus **before** the tax.#### Graph Explanation- **Axes**: The vertical axis represents the *Price ($)*, while the horizontal axis represents the quantity supplied.- **Supply Curves**: - $S1$: Represents the initial supply curve before the tax increase. - $S2$: Represents the new supply curve after the tax is imposed, showing the leftward shift due to the tax impact. #### Understanding Producer Surplus- To identify the producer surplus before the tax, you will need to find the area of the triangle below the $S1$ supply curve and above the market price level.#### Graphing Tools- Click on the appropriate tools as indicated to create shapes and representations on the graph.- For additional help with graphing techniques, you can access the tutorial by clicking [here](#).#### Note- Ensure that you accurately mark the triangle area as it directly represents the surplus amount for producers before tax adjustments.By following these steps and interpretations, you'll be able to visualize and calculate the economic implications of tax effects on supply dynamics effectively.

Price elasticity of demand refers to the responsiveness of the quantity demanded to a change in the…

Answered: A tax on a good with perfectly elastic…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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A tax on a good with perfectly elastic demand causes the supply to shift from S1 to S2, as shown. Use the area tool to draw the triangle representing the producer surplus before the tax. To refer to the graphing tutorial for this question type, please click here. Price ($) S2 S1