Create two new demand and supply diagrams to demonstrate the following: In your first diagram, show the negative externality of consuming too much fast food. Carefully label your diagram and identify the deadweight loss. In your second diagram, add a tax to this market. Highlight what happens to consumption. In a dot point below your second diagram, briefly tell us whether the second diagram has a deadweight loss

Create two new demand and supply diagrams to demonstrate the following: In your first diagram, show the negative externality of consuming too much fast food. Carefully label your diagram and identify the deadweight loss. In your second diagram, add a tax to this market. Highlight what happens to consumption. In a dot point below your second diagram, briefly tell us whether the second diagram has a deadweight loss

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter4: Markets In Action

Section: Chapter Questions

Problem 18SQ

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Economics Question
9. Relationship between tax revenues, deadweight loss, and demandelasticity The 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 two goods 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 the demand 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 the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. PRICE (Dollars per watch) 120 110 100 90 80 70 60 50 40 30 20 10 0 Smart Watches Market S+Tax Supply…