Question
Answered step-by-stepAsked by MateBuffalo49 on coursehero.com
. Consider the market for designer purses. The following graph...
Image transcription text
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. /'\
'31 Before Tax
250
"I'
225 I
200 EqUIIIbrIum
Demand 70' 175 A
E
j
E 150 Consumer Surplus
a
m
(—'B 125 .
B
9' 100
8 Supply Producer Surplus
E
11 75 50 25 0 0 80 160 240 320 400 480 560 640 720 800
QUANTITY (Purses)
Image transcription text
Suppose the government imposes an excise tax on designer purses. The black line on the following graph shows the tax wedge created by a tax of $50 per purse. First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbol) to shade the
area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representing total producer surplus alter the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss. /_\
i\?// After Tax 250 - 225 — 200 _ Tax Revenue Demand 10' 175 A
9
5
S 150 - ConsumerSurplus
8
E 125 — TaxWedge .
E
I 100 ' Producer Surplus
9 Sunply
o:
a '5 I 50 - Deadweight Loss
25 -
0 I : : : : : : I : : 0 80 160 240 320 400 480 560 640 720 800
QUANTITY (Purses)
Image transcription text
Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax, and consumer surplus, producer surplus, tax revenue, and deadweight loss after the tax. Note: You can determine the areas of different portions of the graph by selecting the relevant area. Before Tax After Tax
(Dollars) (Dollars)
Consumer Surplus
Producer Surplus
Tax Revenue 0 Deadweight Loss 0
Answer & Explanation
Solved by verified expertAnswered by EconTutor07 on coursehero.com
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