View the step-by-step solution to:

Question

A pack of cigarette is $1.50 per pack and the quantity sold and bought is 200,000 packs per day. Assuming an

elasticity of demand of -0.85 and elasticity of supply of 2.5,

(a) Calculate the tax revenue and excess burden if the excise tax on each pack of cigarette is $1.50.

(b) Suppose the elasticity of demand is -0.45 and the elasticity of supply is 1.05, what is the incidence of the tax on (i) the consumers (ii) the producer

(c) What is the new tax revenue and excess burden?

Top Answer

a) Tax revenue = $300000 DWL = $192000 b) i) Burden on... View the full answer

Sign up to view the full answer

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question