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Unformatted text preview: dD dp * dp * dG + 1 = dS dp * dp * dG dp * dG = 1 dS dp-dD dp 1 dQ * S dG = dQ * S dp * dp * dG = dS dp dS dp-dD dp dQ * D dG = dQ * D dp * dp * dG = dD dp dS dp-dD dp And the elasticities: dp * p = 1 - dG Q dQ * S Q = - dG Q dQ * D Q = - dG Q Assuming the government can sell back to the consumer, the deadweight loss of a government purchase is the remaining triangle that lies below the supply curve, above the demand curve, to the right of the original equilibrium point. We can approximate this area as follows: DWL = 1 2 ( p S-p D )( Q * S-Q ) And if we wanted we could get this to be in terms of the elasticities or, more simply, use the elasticities to nd these changes, as done in problem sets. 2...
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