9. Relationship between tax revenues, deadweight loss, and demandelasticityThe government is considering levying a tax of $60 per unit on suppliers of either smart watches or yoga mats. The supply curve for each of these twogoods is identical, as you can see on each of the following graphs. The demand for smart watches is shown by Dw (on the first graph), and thedemand for yoga mats is shown by Dy (on the second graph).Suppose the government taxes smart watches. 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 ($60 per watch).On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for smart watches. Then use theblack triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax.PRICE (Dollars per watch)1201101009080706050403020100Smart Watches MarketS+TaxSupplyMO0 50 100 150 200 250 300 350 400 450 500 550 600QUANTITY (Watches)Tax RevenueDeadweight Loss(?)Instead, suppose the government taxes yoga mats. 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 ($60 per mat).On the following graph, do for yoga mats the same thing you did previously on the graph for smart watches. Use the green rectangle (trianglesymbols) to shade the area that represents tax revenue for yoga mats. Then, use the black triangle (plus symbols) to shade the area that representsthe deadweight loss associated with the tax. Instead, suppose the government taxes yoga mats. 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 ($60 per mat).On the following graph, do for yoga mats the same thing you did previously on the graph for smart watches. Use the green rectangle (trianglesymbols) to shade the area that represents tax revenue for yoga mats. Then, use the black triangle (plus symbols) to shade the area that representsthe deadweight loss associated with the tax.PRICE (Dollars per mat)1201101009080706050403020100Yoga Mats MarketS+TaxIf the Government Taxes...Smart watches at $60 per watchYoga mats at $60 per matSupply0 50 100 150 200 250 300 350 400 450 500 550 600QUANTITY (Mats)smaller deadweight loss.DyYTax RevenueDeadweight LossComplete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals.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 taxbecause, all else held constant, taxing a good with a relativelyelastic demand generates larger tax revenue and

Tax incidence refers to the burden of tax that is imposed on buyers and sellers.The burden of tax…

Complete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals. If the Government Taxes... Smart watches at $60 per watch Yoga mats at $60 per mat 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

Complete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals. If the Government Taxes... Smart watches at $60 per watch Yoga mats at $60 per mat 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

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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