2018S161412108D420 +0 1 23 45 6 7 8 9 10 11 12QuantitySuppose that supply and demand at a market are represented by curves S and D atthe figure above (notice that the vertical axis grid has increments of $2) and then atax of $6 dollars per unit is imposed on buyers.What is the tax burden on the sellers?$8$6$4$2Price

Answered: 18 S. 16 14 12 10 8. D 6 4 2 0 1 2 3 4…

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter17: Taxation And Resource Allocation

Section: Chapter Questions

Problem 4TY

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Question

20
18
S
16
14
12
10
8
D
4
2
0 +
0 1 2
3 4
5 6 7 8 9 10 11 12
Quantity
Suppose that supply and demand at a market are represented by curves S and D at
the figure above (notice that the vertical axis grid has increments of $2) and then a
tax of $6 dollars per unit is imposed on buyers.
What is the tax burden on the sellers?
$8
$6
$4
$2
Price

Expert Solution

Step 1

Answer:

According to the above figure, before tax, the sellers were receiving the equilibrium price of $12. After a tax of $6 on buyers, the demand curve shifts down by 6 units and the new equilibrium occurs at point E. The price received by sellers will be the new equilibrium price i.e. $10.

The burden of tax on sellers = Equilibrium price - Price received after tax

Burden of tax on sellers = 12 - 10 = $2

The price received by sellers has decreased by $2 which means the tax burden falls on sellers is 2.

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