The government has imposed a 50 cents gas tax in New York. Many of the residents...

The government has imposed a 50 cents gas tax in New York. Many of the residents are going to the nearby states to get gas instead. Construct a Supply and Demand graph showing the impact of the 50 cents gas tax increase in New York & the shift of some NY residents to the gas stations in nearby states. Show any shifts in the demand and/or supply curves and the resulting equilibrium Price and Quantity. Explain this situation.

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Expert Solution

As the govt impose a 50 cents gas tax many of the residents are going to the nearby states to get gas instead.

So this leads to shift the demand curve of gas leftward for the gas in New York. It is so because now people are buying gas fro other states which leads to reduce the demand of the gs in New York due to 50 cents gas tax.

While the demand curve for gas of other states shift to the right because now even New York residents are demanding the gas from these states.

Diagrams

New equilibrium is E1

Rahul Sunny answered 1 year ago

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