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lilacduck20Lv1
28 Sep 2019
1. The federal government has imposed a new tax on car alarms. Assume that the tax is physically collected from sellers.
a. What effect will this tax have on the equilibrium price and quantity in the market for car alarms?
b. Show the impact of the tax on consumer surplus, producer surplus, tax revenue, and total private economic surplus.
c. How would the elasticity of demand for large car alarms affect the magnitude of the change in total economic surplus resulting from the tax?
d. Given your answers to parts a-b, is there still an argument in favor of such a tax? Explain.
1. The federal government has imposed a new tax on car alarms. Assume that the tax is physically collected from sellers.
a. What effect will this tax have on the equilibrium price and quantity in the market for car alarms?
b. Show the impact of the tax on consumer surplus, producer surplus, tax revenue, and total private economic surplus.
c. How would the elasticity of demand for large car alarms affect the magnitude of the change in total economic surplus resulting from the tax?
d. Given your answers to parts a-b, is there still an argument in favor of such a tax? Explain.
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Yusra AneesLv10
28 Sep 2019