The government is considering levying a tax of $60 per unit on suppliers of either concert tickets or bus passes. The supply curve for each of these two goods is identical, as you can see on each of the following graphs. The demand for concert tickets is shown by DCDC (on the first graph), and the demand for bus passes is shown by DBDB (on the second graph). Suppose the government taxes concert tickets. The following graph shows the annual supply and demand for this good. It also shows the supply curve (S+TaxS+Tax) shifted up by the amount of the proposed tax ($60 per ticket). On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for concert tickets. Then use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. Concert Tickets MarketTax RevenueDeadweight Loss0501001502002503003504004505005506001201101009080706050403020100PRICE (Dollars per ticket)QUANTITY (Tickets)DCSupplyS+Tax Instead, suppose the government taxes bus passes. The following graph shows the annual supply and demand for this good, as well as the supply curve shifted up by the amount of the proposed tax ($60 per pass). On the following graph, do the same thing that you did on the graph for concert tickets. Use the green rectangle (triangle symbols) to shade the area that represents tax revenue for bus passes. Then, use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. Bus Passes MarketTax RevenueDeadweight Loss0501001502002503003504004505005506001201101009080706050403020100PRICE (Dollars per pass)QUANTITY (Passes)DBSupplyS+Tax Complete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals. If the Government Taxes... Tax Revenue Deadweight Loss (Dollars) (Dollars) Concert tickets at $60 per ticket Bus passes at $60 per pass 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 smaller deadweight loss.

The government is considering levying a tax of $60 per unit on suppliers of either concert tickets or bus passes. The supply curve for each of these two goods is identical, as you can see on each of the following graphs. The demand for concert tickets is shown by DCDC (on the first graph), and the demand for bus passes is shown by DBDB (on the second graph). Suppose the government taxes concert tickets. The following graph shows the annual supply and demand for this good. It also shows the supply curve (S+TaxS+Tax) shifted up by the amount of the proposed tax ($60 per ticket). On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for concert tickets. Then use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. Concert Tickets MarketTax RevenueDeadweight Loss0501001502002503003504004505005506001201101009080706050403020100PRICE (Dollars per ticket)QUANTITY (Tickets)DCSupplyS+Tax Instead, suppose the government taxes bus passes. The following graph shows the annual supply and demand for this good, as well as the supply curve shifted up by the amount of the proposed tax ($60 per pass). On the following graph, do the same thing that you did on the graph for concert tickets. Use the green rectangle (triangle symbols) to shade the area that represents tax revenue for bus passes. Then, use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. Bus Passes MarketTax RevenueDeadweight Loss0501001502002503003504004505005506001201101009080706050403020100PRICE (Dollars per pass)QUANTITY (Passes)DBSupplyS+Tax Complete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals. If the Government Taxes... Tax Revenue Deadweight Loss (Dollars) (Dollars) Concert tickets at $60 per ticket Bus passes at $60 per pass 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 smaller deadweight loss.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. Relationship between tax revenues, deadweight loss, and demandelasticity

the person who solved the previous time was wrong please help me with the right explanation and solution

Suppose the government taxes concert tickets. The following graph shows the annual supply and demand for this good. It also shows the supply curve (S+TaxS+Tax) shifted up by the amount of the proposed tax ($60 per ticket).

On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for concert tickets. Then use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax.

Concert Tickets MarketTax RevenueDeadweight Loss0501001502002503003504004505005506001201101009080706050403020100PRICE (Dollars per ticket)QUANTITY (Tickets)DCSupplyS+Tax

Instead, suppose the government taxes bus passes. The following graph shows the annual supply and demand for this good, as well as the supply curve shifted up by the amount of the proposed tax ($60 per pass).

On the following graph, do the same thing that you did on the graph for concert tickets. Use the green rectangle (triangle symbols) to shade the area that represents tax revenue for bus passes. Then, use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax.

Bus Passes MarketTax RevenueDeadweight Loss0501001502002503003504004505005506001201101009080706050403020100PRICE (Dollars per pass)QUANTITY (Passes)DBSupplyS+Tax

Complete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals.

If the Government Taxes...	Tax Revenue	Deadweight Loss
(Dollars)	(Dollars)
Concert tickets at $60 per ticket
Bus passes at $60 per pass

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 smaller deadweight loss.

Concert Tickets Market
120
110
Supply
S+Tax
100
Tax Revenue
90
80
Deadweight Loss
70
60
Do
50
30
10
一
100 150 200 250 300 350 400 450 500 550 600
QUANTITY (Tickets)
50
d fronchicia ifif
CMNS 1115 Chapter 4.pd.
40
20
PRICE (Dollars per ticket)

Bus Passes Market
120
110
Supply
S+Tax
100
Tax Revenue
90
80
Deadweight Loss
70
60
50
40
30
20
D.
B.
10
0 50
100 150 200 250 300 350 400 450 500 550 600
QUANTITY (Passes)
PRICE (Dollars per pass)
++

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