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The same tax of $4 is imposed on this market. The more inelastic demand causes the consumer price to rise to $7.25 and the producer price to fall to $3.25.
The greater increase in consumers' price means that more consumer surplus is lost due to the tax, than was the case when demand was more elastic. Consumers lose $151.25 of surplus due to the tax. Producers' surplus is reduced by $68.75 when the tax is imposed. Total surplus lost due to the tax is $220.
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