Consider the market for electric scooters. The following graph shows the demand and supply for electric scooters before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of electric scooters 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. PRICE (Dollars per scooter) 300 270 PRICE (Dollars per scooter) 240 210 180 150 60 30 0 300 270 240 210 180 150 120 60 0 30 Suppose the government imposes an excise tax on electric scooters. The black line on the following graph shows the tax wedge created by a tax of $60 per scooter. 0 Demand 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 after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss. 40 0 80 Demand Before Tax Supply Tax Wedge 120 160 200 240 280 320 360 400 QUANTITY (Scooters) After Tax + Supply Equilibrium 40 80 120 160 200 240 280 320 360 400 QUANTITY (Scooters) Consumer Surplus Producer Surplus Tax Revenue A Consumer Surplus ? Producer Surplus Deadweight Loss
Consider the market for electric scooters. The following graph shows the demand and supply for electric scooters before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of electric scooters 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. PRICE (Dollars per scooter) 300 270 PRICE (Dollars per scooter) 240 210 180 150 60 30 0 300 270 240 210 180 150 120 60 0 30 Suppose the government imposes an excise tax on electric scooters. The black line on the following graph shows the tax wedge created by a tax of $60 per scooter. 0 Demand 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 after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss. 40 0 80 Demand Before Tax Supply Tax Wedge 120 160 200 240 280 320 360 400 QUANTITY (Scooters) After Tax + Supply Equilibrium 40 80 120 160 200 240 280 320 360 400 QUANTITY (Scooters) Consumer Surplus Producer Surplus Tax Revenue A Consumer Surplus ? Producer Surplus Deadweight Loss
Chapter4: Markets In Action
Section: Chapter Questions
Problem 1SQP
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Transcribed Image Text:Consider the market for electric scooters. The following graph shows the demand and supply for electric scooters before the government imposes any
taxes.
First, use the black point (plus symbol) to indicate the equilibrium price and quantity of electric scooters 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.
PRICE (Dollars per scooter)
300
270
PRICE (Dollars per scooter)
240
210
180
150
60
30
0
300
270
240
210
180
150
120
60
0
30
Suppose the government imposes an excise tax on electric scooters. The black line on the following graph shows the tax wedge created by a tax of
$60 per scooter.
0
Demand
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 after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss.
40
0
80
Demand
Before Tax
Supply
Tax Wedge
120 160 200 240 280 320 360 400
QUANTITY (Scooters)
After Tax
+
Supply
Equilibrium
40 80 120 160 200 240 280 320 360 400
QUANTITY (Scooters)
Consumer Surplus
Producer Surplus
Tax Revenue
A
Consumer Surplus
?
Producer Surplus
Deadweight Loss
Transcribed Image 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.
Consumer Surplus
Producer Surplus
Tax Revenue
Deadweight Loss
Before Tax
(Dollars)
0
0
After Tax
(Dollars)
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