(a)
Determine the percentage of tax borne by a demander and supplier if Es is 1.2 and ED is 0.3.
(a)
Explanation of Solution
If the elasticity of
Thus, the percentage of tax borne by a demander is 80.
Thus, the percentage of tax borne by a supplier is 20.
(b)
Determine the percentage of tax borne by a demander and a supplier if Es is 2 an ED is 3.
(b)
Explanation of Solution
If the elasticity of demand is 3 and elasticity of supply is 2, then the percentage of tax borne by a demander and a supplier can be calculated as follows:
Thus, the percentage of tax borne by a demander is 40.
Thus, the percentage of tax borne by a supplier is 60.
(c)
Determine the percentage of tax borne by a demander and supplier if Es is 1 and ED is 0.5.
(c)
Explanation of Solution
If the elasticity of demand is 0.5 and elasticity of supply is 1, then the percentage of tax borne by a demander and supplier can be calculated as follows:
Thus, the percentage of tax borne by a demander is 66.67.
Thus, the percentage of tax borne by a supplier is 33.33.
(c)
Determine the percentage of tax borne by a demander and supplier if Es is 1 an ED is 0.5.
(c)
Explanation of Solution
If the elasticity of demand is 0.5 and elasticity of supply is 1, then the percentage of tax borne by a demander and supplier can be calculated as follows:
Thus, the percentage of tax borne by a demander is 66.67.
Thus, the percentage of tax borne by a supplier is 33.33.
(d)
Determine the percentage of tax borne by a demander and a supplier if Es is 0.5 and ED is 0.5.
(d)
Explanation of Solution
If the elasticity of demand is 0.5 and elasticity of supply is 0.5, then the percentage of tax borne by a demander and a supplier can be calculated as follows:
Thus, the percentage of tax borne by a demander is 50.
Thus, the percentage of tax borne by a supplier is 50.
(e)
Explain the finding regarding relative elasticity and tax burden.
(e)
Explanation of Solution
Here, the consumers with relatively more elastic demand curve will bear a smaller percentage of the tax. Thus, if the elasticity of demand curves and supply curves eas equal, then the consumer and producer share the tax burden evenly.
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Chapter 7 Solutions
Microeconomics
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