Assume there are two goods, cigarette (X) and fruit drink (Y). Derive the expression for excess burden of a selective excise tax on: i. Good X in terms of ex, Px. X and tx ii. Good Y in terms of ey, Py, Y and ty [4]
[Hint: e, is the price elasticity of demand for good i, P, is price of good i, t, is the rate of taxon good i, where iis quantity of good X and Y, respectively]