Taxes and welfare, Consider the market for luxury yachts.

Taxes and welfare

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Taxes and welfare

Consider the market for luxury yachts. The following graph shows the demand and supply for luxury yachts before the government imposes any taxes.

First, use the black point (plus symbol) to indicate the equilibrium price and quantity of luxury yachts in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price.

Reference no: EM13894153

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