Senator Miller has asked his team of young, expert economists (that's you all) to project the effects of this smaller, one dollar tax on the energy drink market. Produce a graph that contains all of the information below: - Demand curve (with proper price elasticity based on the details described above) - Supply curve (with proper price elasticity based on the nature of the product) - Equilibrium price and quantity - Tax price - Tax incidence - Tax revenue - Deadweight loss
A firestorm of controversy erupted recently on social media outlets and the national press as three teens died attempting to complete the Monster Challenge, which involves recording a person's mass consumption of energy drinks in a very small window of time. Five others were rushed to the hospital. Deeper investigation by media outlets has shed light on the disturbing number of Americans who are hopelessly addicted to energy drinks.
Lawmakers, including Senator Miller (D-CA), have called for an aggressive tax on energy drinks to stop this scourge that is ravaging the community. The Miller Bill would place a two dollar tax on energy drink tall cans (that on average cost $2.50) in all American markets. Other members of Congress led by Senator Cruz (R-TX), however, believed that tax to be too high, so the Miller Bill was amended to decrease the size of the tax to just one dollar.
Therefore, Senator Miller has asked his team of young, expert economists (that's you all) to project the effects of this smaller, one dollar tax on the energy drink market.
Produce a graph that contains all of the information below:
- Demand curve (with proper price elasticity based on the details described above)
- Supply curve (with proper price elasticity based on the nature of the product)
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- Tax price
- Tax incidence
- Tax revenue
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(The best way to do this is probably to assign each enclosed polygon a letter - Triangle A, Trapezoid F, etc.)
1. locate the tax revenue and indicate which lettered regions show that on the graph. Who pays more of the tax - the consumers of energy drinks or the producers of energy drinks? Describe how the graph provides the answer to that question.
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