Question

1. For the following tax scenarios, make some assumptions about the Price Elasticity of Demand for the following products: Milk, Stock Market, Men's clothing, Cigarettes. State clearly the assumptions you are making i.e. rank markets from highest PED to lowest PED? Based on the assumptions you have made, draw the Demand and Supply curves for each scenario in separate graphs. According to the graphs drawn, identify which market has the lowest DWL and which market has the highest DWL? (a) A 25-cent per-gallon tax on milk (b) A tax on stock market transactions (c) A sales tax on men's clothing (d) A tax on cigarettes

Answer 1

The answers are given below  

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