ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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The government is in need of tax revenue and has narrowed down the choice of markets to tax to two: cigarettes or t-shirts. The markets are summarised below.
Cigarettes
Demand: P = 100 – 4Q
Supply: P = Q
T-shirts
Demand: P = 35 – ½Q
Supply: P = 5 + ½Q
Graph the two markets and calculate the
If the government implemented a $5 tax on each market, how much tax revenue could each market generate?
If you were an economic advisor, which market would you suggest taxing and why?
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