The government is considering levying a tax of $25 per unit on suppliers of either jeans or allergy medication. The supp

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The government is considering levying a tax of $25 per unit on suppliers of either jeans or allergy medication. The supply curve for each of these two goods is identical, as you can see on each of the following graphs. The demand for jeans is shown by DJ (on the first graph), and the demand for allergy medication is shown by Da (on the second graph). Suppose the government taxes jeans. The following graph shows the annual supply and demand for this good. It also shows the supply curve ( S+Taz) shifted up by the amount of the proposed tax ($25 per pair). On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for jeans. Then use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. Ca 8 55 50 45 40 S+Tax Jeans Market Supply Tax Revenue
PRICE (Dollars per pair) 60 55 50 L 45 - 40 + 35 30 25 20 15 10 5 0 0 50 S+Tax Jeans Market Supply D₁ 100 150 200 250 300 350 400 450 500 550 600 QUANTITY (Pairs) Tax Revenue Deadweight Loss
Instead, suppose the government taxes allergy medication. The following graph shows the annual supply and demand for this good, as well as the supply curve shifted up by the amount of the proposed tax ($25 per bottle). On the following graph, do for allergy medication the same thing you did previously on the graph for jeans. Use the green rectangle (triangle symbols) to shade the area that represents tax revenue for allergy medication. Then, use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. ollars per bottle) 232RR 55 Allergy Medication Market S+Tax Supply Tax Revenue Deadweight Loss
60 55 50 45 PRICE (Dollars per bottle) 8 35 10 20 15 10 5 0 + 0 Allergy Medication Market S+Tax DA Supply 50 100 150 200 250 300 350 400 450 500 550 600 QUANTITY (Bottles) Tax Revenue Deadweight Loss
Complete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals. Deadweight Loss (Dollars) If the Government Taxes... Jeans at $25 per pair Allergy medication at $25 per bottle Tax Revenue (Dollars) Suppose the government wants to tax the good that will generate more tax revenue at a lower welfare cost. In this case, it should tax because, all else held constant, taxing a good with a relatively elastic demand generates larger tax revenue and smaller deadweight loss. Grade It Now Save & Continue Continue without saving