Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN:9781305971493
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter6: Supply, Demand And Government Policies
Section: Chapter Questions
Problem 4PA
Related questions
Question
![The following graph shows the weekly market for craft beer in some hypothetical economy. Suppose the government levies a tax of $40.60 per case.
The tax places a wedge between the price buyers pay and the price sellers receive.
PRICE (Dolars per case)
200
180
160
140
120
100
80
60
40
20
0
+
Buyers
Sellers
Demand
Before Tax
After Tax
Tax Wedge
Supply
0 100 200 300 400 500 600 700 800 900 1000
QUANTITY (Cases of craft beer)
Complete the following table by filling in the quantity sold, the price buyers pay, and the price sellers receive before and after the tax.
Quantity
Price Buyers Pay
(Cases of craft beer) (Dollars per case)
Price Sellers Receive
(Dollars per case)
Using your answers from 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 case) Elasticity
The tax burden falls more heavily on the side of the market that is
elastic.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa5799d18-a44a-4b93-a727-f9ff288519b4%2Fac81f70b-bd0a-4d00-a897-e9fcbf8c7faf%2F0vniy7_processed.png&w=3840&q=75)
Transcribed Image Text:The following graph shows the weekly market for craft beer in some hypothetical economy. Suppose the government levies a tax of $40.60 per case.
The tax places a wedge between the price buyers pay and the price sellers receive.
PRICE (Dolars per case)
200
180
160
140
120
100
80
60
40
20
0
+
Buyers
Sellers
Demand
Before Tax
After Tax
Tax Wedge
Supply
0 100 200 300 400 500 600 700 800 900 1000
QUANTITY (Cases of craft beer)
Complete the following table by filling in the quantity sold, the price buyers pay, and the price sellers receive before and after the tax.
Quantity
Price Buyers Pay
(Cases of craft beer) (Dollars per case)
Price Sellers Receive
(Dollars per case)
Using your answers from 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 case) Elasticity
The tax burden falls more heavily on the side of the market that is
elastic.
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