advanced analysis Suppose the equation for the demand curve for some product X is P = 8
Chapter 20, Problem 11(choose chapter or problem)
advanced analysis Suppose the equation for the demand curve for some product X is P = 8 0.6Q and the supply curve is P = 2 + 0.4Q. What are the equilibrium price and quantity? Now suppose an excise tax is imposed on X such that the new supply equation is P = 4 + 0.4Q. How much tax revenue will this excise tax yield the government? Graph the curves, and label the area of the graph that represents the tax collection TC and the area that represents the efficiency loss of the tax EL. Briefly explain why area EL is the efficiency loss of the tax but TC is not. LO20.7
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