Excise Tax And Allocative Efficiency

Effect of a $.15 Excise Tax QuantitySupply Price Before Tax Supply Price After Tax 50$ S

Effect of a $.15 Excise Tax QuantitySupply Price Before Tax Supply Price After Tax 50$ S S1

Suppose the elasticity of demand for the good is similar to the elasticity of supply S D What is the equilibrium price? What is the equilibrium quantity? What is the consumer surplus at equilibrium? What is the producer surplus at equilibrium? Assuming this is a competitive market, In what way is this efficient?

Now let’s put that tax in place S D What is the new equilibrium price? What is the new equilibrium quantity? What is the consumer surplus at the new equilibrium? What is the producer surplus at the new equilibrium? Assuming this is a competitive market, In what way is this efficient? S1

Deadweight loss to society S D What is the new equilibrium price? What is the new equilibrium quantity? What is the new equilibrium price paid by consumers? What is the new equilibrium price paid to producers? What is the revenue generated for the government? S1

Part B S Who bears the burden of the tax when demand is more elastic than supply? (supply is more inelastic than demand?) D

Part B S Who bears the burden of the tax when demand is more elastic than supply? (supply is more inelastic than demand?) S1 D

Part C D Who bears the burden of the tax when demand is perfectly inelastic? What about a price floor or ceiling? S

Part C D Who bears the burden of the tax when demand is perfectly inelastic? What about a price floor or ceiling? S S1

Part D D Who bears the burden of the tax when demand is perfectly elastic? What about a price floor or ceiling? S

Part D D Who bears the burden of the tax when demand is perfectly elastic? What about a price floor or ceiling? S S1

Effect of a $.15 Excise Tax S Who bears the burden of the tax when supply is perfectly inelastic? What about a price floor or ceiling? D

Effect of a $.15 Excise Tax S Who bears the burden of the tax when supply is perfectly inelastic? What about a price floor or ceiling? D S1 P

Effect of a price ceiling or floor? S Who bears the burden of the tax when supply is perfectly inelastic? What about a price floor or ceiling? D P