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 $11.00 per bag. The tax places a wedge between the price buyers pay and the price sellers receive . Demand Supply 1027 0100 QUANTITY as of handbaas 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 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. Tax Burden Buyers Sellers (Dollars per bag) Elasticity The tax burden falls more heavily on the side of the market that is elastic.

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 $11.00 per bag. The tax places a wedge between the price buyers pay and the price sellers receive . Demand Supply 1027 0100 QUANTITY as of handbaas 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 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. 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 Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter5: Elasticity

Section: Chapter Questions

Problem 30CTQ: In a market where the supply curve is perfectly inelastic how does an excise tax affect the price...

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