Currently, 200 million gallons of wine are sold per year and the price averages $6 per bottle.
Public Economics and the Price Elasticity of Demand Answers
What is the excess burden associated with a tax of 10% on wine?
What is the excess burden associated with a tax of 20% on wine?
Using your answers in a. and b., what is the relationship between the tax rate and the excess burdens?
Under what circumstances can a doubling of the tax on wine actually improve efficiency? (you will need to remember course material from before the midterm).