Suppose the inverse demand curve for good X is given by the equation Px=10-Qx/10 and the supply curve is perfectly elastic (horizontal) at RM1. Good X is presently taxed at RM2 per unit. Good Y (which is independent of good X) has an inverse demand curve Py=5-Qy/20 and is also elastic at RM1. Good Y is untaxed 1. How much tax revenue is collected and what is the excess burden of the RM2 tax on X 2. How much revenue is collected if the tax on good A is reduced to RM1 per unit and good B at RM1 per unit? 3. What is the total excess burden of taxing both goods at RM1 per unit?
Suppose the inverse demand curve for good X is given by the equation Px=10-Qx/10 and the supply curve is perfectly elastic (horizontal) at RM1. Good X is presently taxed at RM2 per unit. Good Y (which is independent of good X) has an inverse demand curve Py=5-Qy/20 and is also elastic at RM1. Good Y is untaxed 1. How much tax revenue is collected and what is the excess burden of the RM2 tax on X 2. How much revenue is collected if the tax on good A is reduced to RM1 per unit and good B at RM1 per unit? 3. What is the total excess burden of taxing both goods at RM1 per unit?
ChapterP2: Microeconomics Fundamentals
Section: Chapter Questions
Problem 10KC
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Suppose the inverse
1. How much tax revenue is collected and what is the excess burden of the RM2 tax on X
2. How much revenue is collected if the tax on good A is reduced to RM1 per unit and good B at RM1 per unit?
3. What is the total excess burden of taxing both goods at RM1 per unit?
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