The government is considering levying a tax of $120 per unit on suppliers of either pickleball paddles or metro cards. The supply curve for each of these two goods is identical, as you can see on each of the following graphs. The demand for pickleball paddles is shown by Dp (on the first graph), and the demand for metro cards is shown by DM (on the second graph). Suppose the government taxes pickleball paddles. 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 ($120 per paddle). On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for pickleball paddles. Then use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. PRICE (Dollars per paddle) 240 220 200 180 160 140 120 100 Pickleball Paddles Market S+Tax Supply Tax Revenue 80 Dp 60 40 + Deadweight Loss PRICE (Dollars per card) 200 Tax Revenue 180 160 140 120 100 80 60 40 20 0 DM 0 50 100 150 200 250 300 350 400 450 500 550 600 QUANTITY (Cards) + Deadweight Loss Complete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals. If the Government Taxes... Pickleball paddles at $120 per paddle Tax Revenue (Dollars) Deadweight Loss (Dollars) Metro cards at $120 per card 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 Cancer Create
The government is considering levying a tax of $120 per unit on suppliers of either pickleball paddles or metro cards. The supply curve for each of these two goods is identical, as you can see on each of the following graphs. The demand for pickleball paddles is shown by Dp (on the first graph), and the demand for metro cards is shown by DM (on the second graph). Suppose the government taxes pickleball paddles. 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 ($120 per paddle). On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for pickleball paddles. Then use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. PRICE (Dollars per paddle) 240 220 200 180 160 140 120 100 Pickleball Paddles Market S+Tax Supply Tax Revenue 80 Dp 60 40 + Deadweight Loss PRICE (Dollars per card) 200 Tax Revenue 180 160 140 120 100 80 60 40 20 0 DM 0 50 100 150 200 250 300 350 400 450 500 550 600 QUANTITY (Cards) + Deadweight Loss Complete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals. If the Government Taxes... Pickleball paddles at $120 per paddle Tax Revenue (Dollars) Deadweight Loss (Dollars) Metro cards at $120 per card 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 Cancer Create
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The government is considering levying a tax of $120 per unit on suppliers of either pickleball paddles or metro cards. The supply curve for each of
these two goods is identical, as you can see on each of the following graphs. The demand for pickleball paddles is shown by Dp (on the first graph),
and the demand for metro cards is shown by DM (on the second graph).
Suppose the government taxes pickleball paddles. 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 ($120 per paddle).
On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for pickleball paddles. Then use the
black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax.
PRICE (Dollars per paddle)
240
220
200
180
160
140
120
100
Pickleball Paddles Market
S+Tax
Supply
Tax Revenue
80
Dp
60
40
+
Deadweight Loss
Transcribed Image Text:PRICE (Dollars per card)
200
Tax Revenue
180
160
140
120
100
80
60
40
20
0
DM
0 50 100 150 200 250 300 350 400 450 500 550 600
QUANTITY (Cards)
+
Deadweight Loss
Complete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals.
If the Government Taxes...
Pickleball paddles at $120 per paddle
Tax Revenue
(Dollars)
Deadweight Loss
(Dollars)
Metro cards at $120 per card
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
Cancer
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