{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# hw3 - PADP 6950 Fertig Homework 3 Due Fall 2011 UGA Assume...

This preview shows page 1. Sign up to view the full content.

This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: PADP 6950 Fertig Homework 3 Due September 14, 2011 Fall 2011 UGA Assume that the demand for cigarettes is Qd=1600-30P and the supply of cigarettes is Qs=1400+70P. 1. Calculate the equilibrium price and quantity and show them on a supply and demand diagram. 2. Suppose the government levies a \$2 tax for each unit of cigarettes sold. Draw this on the diagram and calculate the new equilibrium price and quantity. 3. Calculate the price elasticity of demand given these two price and quantity points. Is the demand for cigarettes price elastic or inelastic on this part of the demand curve? Interpret the elasticity in words (i.e. If the prices rises by 10%, by what percentage will consumption fall?) 4. On a graph, identify the tax revenue generated by this tax. 5. Indicate each area on the graph with a letter and show in a table the consumer surplus and the producer surplus before and after the tax. Also indicate the dead weight loss associated with this tax. 6. If your policy advisor boss wanted you to provide him/her with arguments in favor of this cigarette tax, what would you say? 7. If your policy advisor boss wanted you to provide him/her with arguments against this cigarette tax, what would you say? ...
View Full Document

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern