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 45 Demand Equibrium 40 35 Consumer Surplus 30 25 20 Producer Surplus 15 Supply 10 160 240 320 400 480 560 640 720 00 QUANTITY (Purses) 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 45 Demand Equibrium 40 35 Consumer Surplus 30 25 20 Producer Surplus 15 Supply 10 160 240 320 400 480 560 640 720 00 QUANTITY (Purses) 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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