Apply the correct label to each of the four colored regions in the graph, which shows the results of a tax increase. deadweight loss consumer surplus producer surplus tax revenue Drag each item above to its appropriate location in the image. Note that every item may not have a match, while some items may have more than one match. Price (per pound) $10 $8 Amount of the tax increase $7 $5 $3 $1 E2 E1 S2 S1 D Quantity
Added by Darrell J.
Close
Step 1
Deadweight loss: Deadweight loss refers to the loss of economic efficiency that occurs when the equilibrium quantity and price of a good or service is not at the optimal level. In this graph, the deadweight loss is represented by the triangle between the original Show more…
Show all steps
Your feedback will help us improve your experience
Crystal Wang and 71 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
Monthly sales of a particular brand of spirits at one store have pre-tax demand curve D1. A new state alcohol tax is enacted, leading to the store's post-tax demand curve D2. The tax is assessed at the point of sale as a tax on buyers. Use the area tool to draw the area representing the deadweight loss that is due to the tax, clicking on the three corners of the area. To refer to the graphing tutorial for this question type, please click here.
Azat N.
Andrew D.
Consider a tax on the producers in a market. By using supply and demand curves, show the consumer surplus, producer surplus, the equilibrium price and quantity traded before tax. Now show the consumer surplus, producer surplus, equilibrium price and quantity traded after tax. Finally make sure to show the revenue of the tax and the deadweight loss associated with the tax. Now do the same exercise in part-c by assuming a tax on consumers. What happens to consumer surplus, producer surplus, equilibrium price and quantity traded after tax?
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Watch the video solution with this free unlock.
EMAIL
PASSWORD