The following graph shows the effect of a tax imposed on...

Name: Problem 6, Chapter 4: Macroeconomics
Uploaded: 2019-08-23T02:13:25-08:00
Duration: 4 min 42 s
Channel: Xiaomin Bian
Description: The following graph shows the effect of a tax imposed on soft drinks. Use this graph to answer the questions. a. Which areas in the graph represent the excess burden (deadweight loss) of the tax? b. Which areas represent the revenues collected by the government from the tax? C. Would this tax on soft drinks be considered efficient? Briefly explain.

The following graph shows the effect of a tax imposed on soft drinks. Use this graph to answer the questions. a. Which areas in the graph represent the excess burden (deadweight loss) of the tax? b. Which areas represent the revenues collected by the government from the tax? C. Would this tax on soft drinks be considered efficient? Briefly explain.

The following graph shows the effect of a tax imposed on soft drinks. Use this graph to answer the questions.
a. Which areas in the graph represent the excess burden (deadweight loss) of the tax?
b. Which areas represent the revenues collected by the government from the tax?
C. Would this tax on soft drinks be considered efficient? Briefly explain.

Key Concepts

Deadweight Loss

Deadweight loss, or excess burden, represents the loss of total surplus that occurs when a tax distorts market behavior. It is indicated on the supply and demand graph by the area where mutually beneficial trades no longer happen due to the tax-induced wedge between the supply and demand curves.

Government Revenue

Government revenue from a tax is the amount collected by the government, calculated as the tax rate multiplied by the quantity sold after the tax. On a graph, it is visually represented by the rectangular area with a height equal to the tax per unit and a width equal to the post-tax quantity traded in the market.

Economic Efficiency

Economic efficiency in the context of taxation refers to how well the tax minimizes distortions in the market while raising revenue. A tax is considered efficient when its deadweight loss is low relative to the amount of revenue it generates, meaning that it causes minimal reductions in the overall economic surplus.

Transcript

00:01 So for those questions, part a s two, which ever represent the that clause.

00:08 Okay, so let's think about the growth.

00:11 So originally we have demanded the and supply press one, but because there is some, like, tax applies to the supply depress.

00:19 And there's upper shift of supply care from s one to s two.

00:24 Because of this upper shift, we know that that would laws so should be equal to the cost to reason why is previously the market can achieve equivalent at p one and q one because now there is a supplier do crus.

00:48 So the new quantity that could be achieved should be the cross point of s to empty.

00:55 That is cute too.

00:56 So if the quantity is cute too actually, um, the total amount of surplus will be this large triangle, but that the laws will be deep cost you because this problem is, you can only be achieved at q two.

01:14 But this triangle, this triangle here, can cannot get for the total surplus.

01:21 So deposed to be the that way lost after the text and which era represents around you collected by the government for the text.

01:31 Okay, let's see.

01:33 Let's say total revenue for the government.

01:37 So for the total around you, let's see that the quality is killed too, right there only cuter amount of goods sold in this market.

01:45 And for each unit of q two can amount of taxes applied to it? and what is the amount of text? the amount of text for each unit is exactly the the amount of shift from s one to ask, too.

01:58 So that is exactly from this point to this point.

02:02 The distance, let's say, uh, this price is peace.

02:06 Sorry.

02:07 Uh, this prices piece right here...

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