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Unformatted text preview: Econ 1 Winter 2008 Dr. Narag 1 Homework 4: Application of Elasticity
(1) The markets for good 1 and good 2 are pictured below. The demand curves for both goods are identical, and they have the same market price, p0 and market quantities, Q0. The government imposes the same excise tax, t, an on each good. Which market will the burden of the tax on the consumer be greater? Why? Which market will suffer the greater deadweight loss? No need to explain, just give your answer. (c) On the graph, show the tax revenue raised by the government by the tax in each market (make sure you draw t the same size in each market). In which market does the government raise more revenue?
(a) (b) (2) Consider the two markets depicted in the following graphs: Econ 1 Winter 2008 Dr. Narag 2 (a) (b) In which market are consumers are more responsive to price? Explain. Suppose that the government wants to place a tax on one of these markets. If the government wants to maximize revenue relative to the loss of consumer and producer surplus, which market should it choose to tax? Why? ...
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This homework help was uploaded on 04/16/2008 for the course ECON 1 taught by Professor Nagata during the Winter '08 term at UCLA.
- Winter '08