Question

3. Relationship between tax revenues, deadweight loss, and demand elasticity The government is considering levying a tax of $60 per unit on suppliers of either concert tickets or bus passes. The supply curve for each of these two goods is identical, as you can see on each of the following graphs. The demand for concert tickets is shown by Dc (on the first graph), and the demand for bus passes is shown by Dn (on the second graph), Suppose the government taxes concert tickets. The following graph shows the annual supply and demand for this good. It also shows the supply curve (S+Taz) shifted up by the amount of the proposed tax ($60 per ticket). On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for concert tickets. Then use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. Concert Tickets Market FREE 8 Supply 8 Tax Revenue 8 Deadweight Loss 8 8 PRICE(Dollars perticket) 8 8 8 8 0 50 100 150 200 250 300 350 400 450 500 580 800 QUANTITY (Tickets) Instead, suppose the government taxes bus passes. The following graph shows the annual supply and demand for this good, as well as the supply curve shifted up by the amount of the proposed tax ($60 per pass). On the following graph, do for bus passes the same thing you did previously on the graph for concert tickets. Use the green rectangle (triangle symbols) to shade the area that represents tax revenue for bus passes. Then, use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax

in this case it should tax (concert tickets, bus passes)

With a relatively (less, more)

Answer 1

Concert tickets lan uvenu. (70-10x50 3000 Deadweight loss 3x (70-10) x (300-50) = 7500 Bus passes Tax uewenue - (100-40) x 200 E 124000 - Deadweight loss X (100-40) X (300-20D) = 3000

Page No. Date 70 Dead weight lon suwenon 50 300 100 Deadweight an suvene 4 . 200 300 in Conunt tickets..... Bus passes........ uvenue 3000 12,000 Deadweight lon 7500 3000 suppese Passes the government ........ .... .... Bus ...... wlatively less classic...