9. Effect of a tax on buyers and sellers The following graph shows the dally market for jeans when the tax on sellers is set at $0 per pair. Suppose the government institutes a tax of $40.60 per pair, to be paid by the seller. (Hint: To see the impact of the tax, enter the value of the tax in the Tax on Sellers field and move the green line to the after-tax equilibrium by adjusting the value in the Quantity fleld. Then, enter zero in the Tax on Sellers feld. You should see a tax wedge between the price buyers pay and the price sellers receive.) Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white feld, the graph and any corresponding amounts in each grey feld will change accordingly. Graph Input Tool 200 Market for Jeans 180 Quantity Mairs of jeans) Demand Price (Dellars per pair) 60 Sly Supply Price (Dilars per pair) 140 132.00 0.00 120 Supply Shifter Demand Tax on Sellers (Dolars per par) 0.00 20 100 150 200 20 00 30 400 450 00 QUANTITY Pars of jeara) FIl in the following table with the quantity sold, the price buyers pay, and the price sellers recelve before and after the tax. Quantity Price Buyers Pay Price Sellers Receilve (Pairs of jeans) (Dollars per pair) (Dollars per pair) Before Tax After Tax Using the data you entered in the previous table, calculate the tax burden that falls on buyers and sellers, respectively, and calculate the price elasticity of demand and supply throughout the relevant ranges using the midpoint method. Enter your results in the following table. Tax Burden (Dollars per pair) Elasticity Buyers Sellers The burden of the tax falls more heavily on the elastic side of the market. PRICE (Dolans per par)
9. Effect of a tax on buyers and sellers The following graph shows the dally market for jeans when the tax on sellers is set at $0 per pair. Suppose the government institutes a tax of $40.60 per pair, to be paid by the seller. (Hint: To see the impact of the tax, enter the value of the tax in the Tax on Sellers field and move the green line to the after-tax equilibrium by adjusting the value in the Quantity fleld. Then, enter zero in the Tax on Sellers feld. You should see a tax wedge between the price buyers pay and the price sellers receive.) Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white feld, the graph and any corresponding amounts in each grey feld will change accordingly. Graph Input Tool 200 Market for Jeans 180 Quantity Mairs of jeans) Demand Price (Dellars per pair) 60 Sly Supply Price (Dilars per pair) 140 132.00 0.00 120 Supply Shifter Demand Tax on Sellers (Dolars per par) 0.00 20 100 150 200 20 00 30 400 450 00 QUANTITY Pars of jeara) FIl in the following table with the quantity sold, the price buyers pay, and the price sellers recelve before and after the tax. Quantity Price Buyers Pay Price Sellers Receilve (Pairs of jeans) (Dollars per pair) (Dollars per pair) Before Tax After Tax Using the data you entered in the previous table, calculate the tax burden that falls on buyers and sellers, respectively, and calculate the price elasticity of demand and supply throughout the relevant ranges using the midpoint method. Enter your results in the following table. Tax Burden (Dollars per pair) Elasticity Buyers Sellers The burden of the tax falls more heavily on the elastic side of the market. PRICE (Dolans per par)
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter6: Supply, Demand And Government Policies
Section: Chapter Questions
Problem 4PA
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