7. Effect of a tax on buyers and sellers The following graph shows the weekly market for craft beer in some hypothetical economy. Suppose the government levies a tax of $20.30 per case. The tax places a wedge between the price buyers pay and the price sellers receive. 100 PRICE (Dollars per case) 90 H 80 Demand Supply 70 60 %%% 50 Tax Wedge 40 30 я 20 10 0 0 100 200 300 400 500 600 700 QUANTITY (Cases of craft beer) 800 900 1000 ? 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 (Cases of craft beer) Price Buyers Pay (Dollars per case) Price Sellers Receive (Dollars per case) Before Tax After Tax Using your answers from the previous table, calculate the tax burden that falls on buyers and on sellers, 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. Buyers Sellers Tax Burden (Dollars per case) Elasticity The tax burden falls more heavily on the side of the market that is elastic.
7. Effect of a tax on buyers and sellers The following graph shows the weekly market for craft beer in some hypothetical economy. Suppose the government levies a tax of $20.30 per case. The tax places a wedge between the price buyers pay and the price sellers receive. 100 PRICE (Dollars per case) 90 H 80 Demand Supply 70 60 %%% 50 Tax Wedge 40 30 я 20 10 0 0 100 200 300 400 500 600 700 QUANTITY (Cases of craft beer) 800 900 1000 ? 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 (Cases of craft beer) Price Buyers Pay (Dollars per case) Price Sellers Receive (Dollars per case) Before Tax After Tax Using your answers from the previous table, calculate the tax burden that falls on buyers and on sellers, 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. Buyers Sellers Tax Burden (Dollars per case) Elasticity The tax burden falls more heavily on the side of the market that is elastic.
Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN:9781305971493
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter6: Supply, Demand And Government Policies
Section: Chapter Questions
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