Figure 15.2

Figure 15.2 shows a demand curve and two sets of supply curves, one set more elastic than the other.
-Refer to Figure 15.2.If the government imposes an excise tax of $1.00 on every unit sold, the government's revenue from the tax

Question

Figure 15.2
  
Figure 15.2 shows a demand curve and two sets of supply curves, one set more elastic than the other.
-Refer to Figure 15.2.If the government imposes an excise tax of $1.00 on every unit sold, the government's revenue from the tax

Quizplus · Accepted Answer

When the supply curve is S₁, the tax burden is shared between producers and consumers, and there is a larger reduction in the equilibrium quantity, resulting in a greater increase in the price paid by consumers. This leads to an increase in government revenue from the tax compared to when the supply curve is S₀, where the burden falls mainly on producers and the reduction in equilibrium quantity is less. Therefore, the government revenue from the tax is larger if the supply curve is S₁.

Figure 15.2 Figure 15.2 Shows a Demand Curve and Two Sets of Curve