Consider the market for designer purses. The following graph shows the demand and supply for designer purses before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of designer purses in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price. Before Tax 50 45 Demand Equilibrium 40 35 30 Consumer Surplus 25 20 Producer Surplus 15 Supply 10 80 160 240 320 400 480 640 720 800 QUANTITY (Purses) Suppose the government imposes an excise tax on designer purses. The black line on the following graph shows the tax wedge created by a tax of $20 per purse. PRICE (Dollars per purse)

Consider the market for designer purses. The following graph shows the demand and supply for designer purses before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of designer purses in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price. Before Tax 50 45 Demand Equilibrium 40 35 30 Consumer Surplus 25 20 Producer Surplus 15 Supply 10 80 160 240 320 400 480 640 720 800 QUANTITY (Purses) Suppose the government imposes an excise tax on designer purses. The black line on the following graph shows the tax wedge created by a tax of $20 per purse. PRICE (Dollars per purse)

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter4: Supply And Demand: An Initial Look

Section: Chapter Questions

Problem 8TY

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