Chapter 9R, Problem 17MCQ

To determine

Consumer surplus by buyers in the jean market before imposition of tax and after the imposition of tax.

Explanation of Solution

Consumer surplus before the imposition of tax would be:

  $\begin{array}{l}\text{Consumer surplus before the imposition of tax = Price before tax}\times \text{ quantity sold}\hfill \\ \text{ = \$12}\text{.5}\times \text{50}\hfill \\ \text{ = \$625}\hfill \end{array}$

  $\begin{array}{l}\text{Consumer surplus after the imposition of tax would be:}\hfill \\ \text{Consumer surplus after the imposition of tax = Price after tax}\times \text{ quantity sold}\hfill \\ \text{ = }\left(\text{D1}-\text{Dt}\right)\times \text{20}\hfill \\ \text{ = }\left(\text{\$50}-\text{\$30}\right)\times \text{20}\hfill \\ \text{ = \$400}\hfill \end{array}$

Therefore, the correct option is a.

Economics Concept Introduction

Introduction:

Any excess in production, earning, or the supply of goods is called surplus which is more than the need.

A tax burden involves the payment that a taxpayer pays to the government and an economic loss that a taxpayer bears in reaction to taxes.