Tax revenue and dead weight loss
- Use the following graph for the market for trinkets to answer the questions :
1 . 1 Looking at the graph , which is more elastic : supply or demand ? How do you know ?
1 . 2 Suppose a $ 2 . 50 is imposed on the buyers in this market . Draw the new demand curve ( that determines the new quantity ) on the graph above , and show where the consumer surplus , producer surplus , tax revenue and dead weight loss is .
1 . 3 What is the new quantity of trinkets sold ? At what price to buyers pay ? What price do sellers recieve ?
1 . 4 Calculate the tax revenue and the dead weight loss ( hint : the area of a rectangle is base times height . the area of a triangle is 1/2 times height ) .
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