This is the graph I did for this problem. Could someone explain to me if I am ri

Question

This is the graph I did for this problem. Could someone explain to me if I am right or wrong. Thanks in advance!

Using the information in the Deadweight Loss from Wireless Taxes application, draw graphs to illustrate why the tax on landlines creates no deadweight loss while the tax on cell phones creates a more substantial deadweight loss. 1.) Use the line drawing tool to draw the demand for landline minutes. Label this line 'landline' 2.) Use the line drawing tool to draw the demand for wireless minutes. Draw the curve such that wireless demand, landline demand and supply intersect at the same point. Label this line 'wireless' 3.) Use the point drawing tool to indicate the initial equilibrium. Label this point'E 4) Use the line drawing tool to show how a specific tax affects the supply of minutes. Label this line 'S'. Carefully follow the instructions above, and only draw the required objects.

Explanation / Answer

Here in this given problem the demand for landlines is fixed => it should be perfectly inelastic and the demand for wireless is downward sloping, let's assume that the supply is hozrizontal, and both is on the same initial equilibrium which is given by "E1".

If the tax is imposed then the supply curve will shift upward. So since the demand for landlines is vertical it will only increase the price no deadweight lose will be created, but in the case of wireless since the deman is downward sloping => it will increase the price as well as deadweight loses.

So, i think the above fig is perfect.

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