Question

2. Taxes: Calculations. Use the table below to answer the questions. Qd is the demanded quantities and Qo is the offered quantities. PRICE Q_D Q_o 1.00 $ 1000 0 1.50 $ 900 100 2.00 $ 800 200 2.50 $ 700 300 3.00 $ 600 400 3.50 $ 500 500 4.00 $ 400 600 4.50 $ 300 700 5.00 $ 200 800 5.50 $ 100 900 6.00 $ 0 1000 a. What are the initial equilibrium price and quantity? b. Calculate the consumer and producer surplus. C. For the remaining questions of this section, suppose that the Government imposes a new tax of $1 / unit to the sellers of gadgets. Calculate the new prices for consumers and producers as well as the new equilibrium quantity. d. In a graph, show how the equilibrium has changed and how the new total surplus is allocated to consumers, producers and government. e. Calculate the deadweight loss and explain what is it. f. Calculate the proportion of the tax supported by consumers. g. Calculate the proportion of the tax supported by producers h. Conclude: From your last answer, deduce whether or not the supply curve is more elastic than the demand curve. Explain i. Economically speaking, should the government tax the consumers of gadgets rather than the producers to protect its electoral base former by the producers?

Answer 1