3. Effect of a tax on buyers and sellersThe following graph shows the daily market for wine. Suppose the government institutes a tax of $40.60 per bottle. This places a wedge between theprice buyers pay and the price sellers receive.200180160DemandSupply140120100Tax Wedge8060402050100150200250 300350400450500QUANTITY (Bottles of wine)PRICE (Dollars per bottle) Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax.QuantityPrice Buyers PayPrice Sellers Receive(Bottles of wine)(Dollars per bottle)(Dollars per bottle)Before TaxAfter TaxUsing the data you entered in the previous table, calculate the tax burden that falls on buyers and on sellers, respectively, and calculate the priceelasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table.Tax Burden(Dollars per bottle)ElasticityBuyersSellersThe burden of the tax falls more heavily on the v elastic side of the market.

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The following graph shows the daily market for wine. Suppose the government institutes a tax of $40.60 per bottle. This places a wedge between the price buyers pay and the price sellers receive. 200 180 160 Demand Supply 140 120 100 Tax Wedge 80 60 40 20 50 100 150 200 250 300 350 400 450 500 QUANTITY (Bottles of wine) PRICE (Dollars per bottle)

The following graph shows the daily market for wine. Suppose the government institutes a tax of $40.60 per bottle. This places a wedge between the price buyers pay and the price sellers receive. 200 180 160 Demand Supply 140 120 100 Tax Wedge 80 60 40 20 50 100 150 200 250 300 350 400 450 500 QUANTITY (Bottles of wine) PRICE (Dollars per bottle)

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 10PA

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Question

3. Effect of a tax on buyers and sellers
The following graph shows the daily market for wine. Suppose the government institutes a tax of $40.60 per bottle. This places a wedge between the
price buyers pay and the price sellers receive.
200
180
160
Demand
Supply
140
120
100
Tax Wedge
80
60
40
20
50
100
150
200
250 300
350
400
450
500
QUANTITY (Bottles of wine)
PRICE (Dollars per bottle)

Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax.
Quantity
Price Buyers Pay
Price Sellers Receive
(Bottles of wine)
(Dollars per bottle)
(Dollars per bottle)
Before Tax
After Tax
Using the data you entered in 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
(Dollars per bottle)
Elasticity
Buyers
Sellers
The burden of the tax falls more heavily on the v elastic side of the market.

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