Consider the market for designer purses. The following graph shows the demand and supply for designer purses before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of designer purses 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. Before Tax 50 45 Demand Equilibrium 40 35 30 Consumer Surplus 25 20 Producer Surplus 15 Supply 10 80 160 240 320 400 480 640 720 800 QUANTITY (Purses) Suppose the government imposes an excise tax on designer purses. The black line on the following graph shows the tax wedge created by a tax of $20 per purse. PRICE (Dollars per purse)

Consider the market for designer purses. The following graph shows the demand and supply for designer purses before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of designer purses 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. Before Tax 50 45 Demand Equilibrium 40 35 30 Consumer Surplus 25 20 Producer Surplus 15 Supply 10 80 160 240 320 400 480 640 720 800 QUANTITY (Purses) Suppose the government imposes an excise tax on designer purses. The black line on the following graph shows the tax wedge created by a tax of $20 per purse. PRICE (Dollars per purse)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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mIcroeconmics question 7

Consider the market for designer purses. The following graph shows the demand and supply for designer purses before the government imposes any
taxes.
First, use the black point (plus symbol) to indicate the equilibrium price and quantity of designer purses 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.
Before Tax
50
45
Demand
Equilibrium
40
35
30
Consumer Surplus
25
20
Producer Surplus
15
Supply
10
80
160
240
320 400
480
640
720
800
QUANTITY (Purses)
Suppose the government imposes an excise tax on designer purses. The black line on the following graph shows the tax wedge created by a tax of
$20 per purse.
PRICE (Dollars per purse)

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