The U.S. Senate is considering a bill that would tax the sale of laptop computers in order to fund a computer education program for presidential hopefuls. The Congressional Budget Office (CBO) estimates that if it implements a low tax of $12 per laptop, revenue should be sufficient to exactly fund the program. The CBO also estimates that a high tax of $230 per laptop will exactly fund the program.
a. How can a low tax and a high tax raise exactly enough money to fund the program? Illustrate your answer using a graph.
b. Suppose that you are an economic advisor to the Senate Finance Committee, tasked with analyzing the economic impact of the tax proposals. Which proposal do you recommend, and why?