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3. Effect of a tax on buyers and sellers The following graph shows the weekly market for handbags in some hypothetical economy. Suppose the government levies a tax of $40.60 per bag. The tax places a wedge between the price buyers pay and the price sellers receive. PRICE (Dollars par bag) 103 Demand Supply 143 120 100 GO 40 20 50 Tax Wedge 100 150 200 250 300 350 400 450 500 QUANTITY (Bags of handbags) ? Complete the following table by filling in the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity (Bags of handbags) Price Buyers Pay (Dollars per bag) Price Sellers Receive (Dollars per bag) Before Tax After Tax Using your answers from the previous table, calculate the tax burden that fals on buyers and on selers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table. Tax Burden Buyers Sellers (Dollars per bag) Elasticity The tax burden falls more heavily on the side of the market that is elastic.

3. Effect of a tax on buyers and sellers The following graph shows the weekly market for handbags in some hypothetical economy. Suppose the government levies a tax of $40.60 per bag. The tax places a wedge between the price buyers pay and the price sellers receive. PRICE (Dollars par bag) 103 Demand Supply 143 120 100 GO 40 20 50 Tax Wedge 100 150 200 250 300 350 400 450 500 QUANTITY (Bags of handbags) ? Complete the following table by filling in the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity (Bags of handbags) Price Buyers Pay (Dollars per bag) Price Sellers Receive (Dollars per bag) Before Tax After Tax Using your answers from the previous table, calculate the tax burden that fals on buyers and on selers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table. Tax Burden Buyers Sellers (Dollars per bag) Elasticity The tax burden falls more heavily on the side of the market that is elastic.

Principles of Microeconomics
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter6: Supply, Demand And Government Policies
Section: Chapter Questions
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3. Effect of a tax on buyers and sellers The following graph shows the weekly market for handbags in some hypothetical economy. Suppose the government levies a tax of $40.60 per bag. The tax places a wedge between the price buyers pay and the price sellers receive. PRICE (Dollars par bag) 103 Demand Supply 143 120 100 GO 40 20 50 Tax Wedge 100 150 200 250 300 350 400 450 500 QUANTITY (Bags of handbags) ? Complete the following table by filling in the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity (Bags of handbags) Price Buyers Pay (Dollars per bag) Price Sellers Receive (Dollars per bag) Before Tax After Tax Using your answers from the previous table, calculate the tax burden that fals on buyers and on selers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table. Tax Burden Buyers Sellers (Dollars per bag) Elasticity The tax burden falls more heavily on the side of the market that is elastic.
Transcribed Image Text:3. Effect of a tax on buyers and sellers The following graph shows the weekly market for handbags in some hypothetical economy. Suppose the government levies a tax of $40.60 per bag. The tax places a wedge between the price buyers pay and the price sellers receive. PRICE (Dollars par bag) 103 Demand Supply 143 120 100 GO 40 20 50 Tax Wedge 100 150 200 250 300 350 400 450 500 QUANTITY (Bags of handbags) ? Complete the following table by filling in the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity (Bags of handbags) Price Buyers Pay (Dollars per bag) Price Sellers Receive (Dollars per bag) Before Tax After Tax Using your answers from the previous table, calculate the tax burden that fals on buyers and on selers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table. Tax Burden Buyers Sellers (Dollars per bag) Elasticity The tax burden falls more heavily on the side of the market that is elastic.
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