Calculate the change in consumer surplus due to sales tax

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Reference no: EM13987017

Suppose the market for cigarettes is characterized by the following information:

Qd = 70 – 5P [Demand] Qs = 3P – 10 [Supply]

[Note: P = price per unit; Qd = thousands of units demanded; Qs = thousands of units supplied]

Suppose the government imposes a sales tax of $2 per unit.

Answer questions (i) through (v) below:

i) Calculate the magnitude of the consumer surplus and producer surplus in the pre-tax equilibrium.

ii) Calculate the tax revenue in the post-tax equilibrium.

iii) Calculate the change in consumer surplus due to the sales tax.

iv) Calculate the change in producer surplus due to the sales tax.

v) Calculate the Dead-Weight-Loss due to the sales tax.

Reference no: EM13987017

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