Question

Please help me answer number 11

/ 1 (-) (t)11 114% The supply of tickets, Qs, is represented by the 11. Suppose that a new $50 tax is placed on each equation new cell phone sold. Use the information irn the following graph to answer these questions. a. What is the incidence of the tax? b. What is the deadweight loss of the tax? с.what is the amount of tax revenue Qs 500 + 80P a. Find the equilibrium price and quantity of tickets sold. (Hint: Set Qn- Qs and solve for the price, P, and then plug the result back into either of the original equations to find Qp.) generated? Price of cell phones sold (per month) $50 50 60 Quantity (cell phones)

Answer 1

[a ] Incidence of tax - Distribution of burden of tax between seller and buyer.

we started at a point where price was $ 60 and after tax it rose to $100, that means increase of $40 after tax and the rate of tax was $50.

so consumer pays $40 out of $50 that is 4/5 of total tax or 80%

and the seller pays remaining 20% that is $10

[b] dead weight loss of tax - [ yellow triangular region on the graph]

1/2 base into height

1/2 into 50 into 10

250

[c] amount of tax revenue generated or government's revenue = [ brown part on the graph]

tax + quantity sold

50+50 = 100