Ebenezer Scrooge has just been elected the new President of Christmasland. As hi

Question

Ebenezer Scrooge has just been elected the new President of Christmasland. As his first action he is thinking of introducing an excise (or commodity) tax on Santa hats or Christmas lights. The demand and supply curves for both products are shown on the graphs below. Use the graphs to answer the questions that follow. You can move the graphs, but they will not be graded. What would be the total deadweight loss of a $3 tax on Santa hats? What would be the total deadweight loss of a $3 tax on Christmas lights? The deadweight loss for Santa hats and Christmas lights is different because the graph with the higher deadweight loss has a more elastic demand curve. inelastic demand curve. inelastic supply curve. elastic supply curve.

Explanation / Answer

1) 3000

2) 1500

elastic demand curve

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