PRICE (Dollars per handbag)10090807060 Tax Wedge5040302010Demand0Supply0 160 320 480 640 800After TaxConsumer SurplusProducer SurplusTax RevenueDeadweight Loss960QUANTITY (Handbags)1120 1280 1440 1600Before Tax(Dollars)00Tax RevenueAComplete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax, and consumersurplus, 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.After Tax(Dollars)Consumer SurplusProducer SurplusDeadweight Loss Consider the market for designer handbags. The following graph shows the demand and supply for designer handbags before the government imposesany taxes.First, use the black point (plus symbol) to indicate the equilibrium price and quantity of designer handbags in the absence of a tax. Then use the greenpoint (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamondsymbol) to shade the area representing total producer surplus (PS) at the equilibrium price.PRICE (Dollars per handbag)10090807060504030201000DemandSupplyBefore Tax160 3:20 480 640 800 960 1120 1280 1440 1600QUANTITY (Handbags)+EquilibriumConsumer SurplusProducer Surplus

Demand-supply equilibrium: Demand refers to the total demanded quantity for commodities and services…

100 90 80 PRICE (Dollars per handbag) 8 70 60 Tax Wedge 50 40 20 10 Demand D Supply After Tax 0 160 320 480 640 800 960 1120 1280 1440 1600 QUANTITY (Handbags) Consumer Surplus Producer Surplus Tax Revenue Deadweight Loss Tax Revenue 0 0 Consumer Surplus Producer Surplus Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax, and consume 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) Deadweight Loss

100 90 80 PRICE (Dollars per handbag) 8 70 60 Tax Wedge 50 40 20 10 Demand D Supply After Tax 0 160 320 480 640 800 960 1120 1280 1440 1600 QUANTITY (Handbags) Consumer Surplus Producer Surplus Tax Revenue Deadweight Loss Tax Revenue 0 0 Consumer Surplus Producer Surplus Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax, and consume 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) 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 1SQP

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