Problem
Suppose that the US Senate is considering imposing a $0.06 per pound tax on blueberries. Your staff estimates that the price elasticity of demand for blueberries is 0.8 and the price elasticity of supply for blueberries is 0.4.
How much will the supply price of blueberries fall if the government imposes such a tax? Who bears the greater burden of the tax, consumers or producers? What is the deadweight loss of the tax if the current price of blueberries is $3 per pound and the current quantity of blueberries sold is 100,000 pounds? How much revenue will be raised? What is the deadweight loss per dollar of revenue for this tax? If the supply curve were perfectly elastic, what would be the deadweight loss per dollar of revenue? If the supply curve were perfectly inelastic, what would be the deadweight loss per dollar of revenue?