What does a laffer curve look like in the market

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Reference no: EM13233481

The aggregate demand for cookies is perfectly inelastic. Quantity demanded is 10 cookies regardless of price. The aggregate supply of cookies is perfectly elastic. Quantity supplied is 0 if the price is below $5 and infinite at $5.

A. Find the equilibrium.
B. Suppose there is a $1 tax on each cookie. Find the new transaction volume.
C. What is the tax incidence?
D. What does a Laffer curve look like in this market?

Reference no: EM13233481

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