The following graph shows the daily market for wine. Suppose the government institutes a tax of $11.60 per bottle. This places a wedgebetween the price buyers pay and the price sellers receive.F04540Supply3530Tax Wedge252015105Demand0050100150200250300350400450500QUANTITY (Bottles of wine)PRICE (Dollars per bottle)S

Question
Asked Sep 29, 2019
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
Elasticity
(Dollars per bottle)
Buyers
 
    
Sellers
 
    
 
The burden of the tax falls more heavily on the __elastic side of the market.
The following graph shows the daily market for wine. Suppose the government institutes a tax of $11.60 per bottle. This places a wedge
between the price buyers pay and the price sellers receive.
F0
45
40
Supply
35
30
Tax Wedge
25
20
15
10
5
Demand
0
0
50
100
150
200
250
300
350
400
450
500
QUANTITY (Bottles of wine)
PRICE (Dollars per bottle)
S
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The following graph shows the daily market for wine. Suppose the government institutes a tax of $11.60 per bottle. This places a wedge between the price buyers pay and the price sellers receive. F0 45 40 Supply 35 30 Tax Wedge 25 20 15 10 5 Demand 0 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Bottles of wine) PRICE (Dollars per bottle) S

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Step 1

It can be seen from the above diagram that equilibrium price = $25 and equilibrium quantity = 250 units. Furthermore, there is a tax of $11.60 imposed by the ...

Bottles of Wine
Before Tax
After Tax
Price buyer pays
Price sellers receive
$25
S23.40 ($35-$11.60)
Quantity
250
220
$25
$35
Tax Burden
$10 ($35-$25)
$1.60 ($25-$23.40)
Elasticity
0.67
Buyers
Sellers
3.36
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Bottles of Wine Before Tax After Tax Price buyer pays Price sellers receive $25 S23.40 ($35-$11.60) Quantity 250 220 $25 $35 Tax Burden $10 ($35-$25) $1.60 ($25-$23.40) Elasticity 0.67 Buyers Sellers 3.36

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