1. Draw how the burden of the tax is distributed under the following scenarios:a) Inelastic demand and elastic supplyb) Elastic demand and inelastic supplyc) Relative elasticities of demand and supply are similarIn each diagram, clearly label: equilibrium price before the tax, price paid by buyers after thetax, price received by sellers after the tax, portion of tax burden on consumers, and portion of taxburden on producers.

a) Inelastic demand and elastic supply:In this case, the initial equilibrium is at e at price P and…

Answered: 1. Draw how the burden of the tax is…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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12. Effect of a tax on buyers and sellers The following graph shows the daily market for shoes when the tax on sellers is set at $0 per pair. Suppose the government institutes a tax of $11.60 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 field. Then enter zero in the Tax on Sellers field. 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 field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per pair) 100 90 80 70 60 50 40 30 20 10 0 Demand Before Tax After Tax 0 100 200 300 400 500 600 700 800 900 1000 QUANTITY (Pairs of shoes) Buyers Sellers Supply Tax…
Consider the graph at right. Assume that before any tax, firms were willing to supply 5 thousand pounds of lobster at a price of $50 per pound. 100- 95- Use the line drawing tool to draw a new supply curve reflecting a $10 per pound tax, Label this line 'STax. 90- 85- Carefully follow the instructions above, and only draw the required object. 80- 75 70- 65- 60- 55 45- 40 35 30 25 20- 15 10- 10 Quantity (thousands) tv 30 ear AlI Ger MoreHOIn Teach Me Text Pages MacBook Air DII F10 80 F8 F7 F6 F5 F4 esc F2 F3 F1 $ % & ! @ 6 7 8 3 4 1 0 P W E R T Y Q ....
What is the relation between elasticity and tax incidence? Question 8 options: Only the elasticity of supply affects who carries the burden of the tax Only the elasticity of demand affects who carries the burden of the tax The elasticities of demand and supply both affect who 'carries the burden of the tax' (tax incidence) There is no relation between elasticities and tax incidence
3. Suppose the market equilibrium price for Kindles are $50 each. Using a supply and demand graph, illustrate the effect of an addition of a $10 per-unit unit tax on Kindles (imposed on sellers), where the entire tax incidence is equally split between buyers and sellers. Point out the following before and after the excise tax: a. Consumer surplus b. Producer surplus c. Tax revenue d. Deadweight loss
Refer to Figure 2. It shows the imposition of a per-unit tax on the market for cigarettes. S = Market Supply Curve; D = Market Demand Curve; S+Tax = Market Supply Curve with per-unit tax imposed. The total tax collected can be represented by: A) Triangle ABFB) Rectangle PTaxC) Rectangle PTaxECAD) Rectangle P0 ECB
QUESTION 18 Exhibit 19-6 Price of Good X 0 Quantity of Good X Refer to Exhibit 19-6. Suppose the three equilibrium quantities are 700, 800, and 900, and the two equilibrium prices are $2.20 and $2.75. What is the tax revenue collected from the tax that shifted S 1 to S 2 when D 1 is the relevant demand curve? a. $440 Ob. $600 O c. $900 Od. $800
1) Describe in detail how taxes impact consumer and producer surplus. In your discussion, also show graphically, the before and after-tax impact.
The deadweight loss due to the imposition of an excise tax is lowest when Group of answer choices 1. demand is relatively inelastic and supply is relatively elastic. 2. demand is relatively inelastic and supply is relatively inelastic. 3. demand is relatively elastic and supply is relatively elastic. 4. demand is relatively elastic and supply is relatively inelastic.
Refer to the interactive below: Tax Burden II. GRAPH O SETTINGS Tax Burden Off Reset ($) Price Tax imposed on: Supply Demand 90 $90.00 Excise Tax (0 - $20) 0.00 80 70 Demand 60 Perfectly Relatively Inelastic Elastic Relatively Elastic 50 $50.00 40 Supply Less Perfectly 30 Elastic Elastic Perfectly Elastic 20 D 10 CALCULATIONS 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 Quantity (thousands per week) Price Paid Quantity No Tax $50.00 4,000 With Tax $50.00 Instructions: Adjust the sliders so that the vertical intercept of the supply curve is $20 and the demand curve is perfectly inelastic. Click the Tax Burden switch above the graph to On. Make additional modifications to the interactive tool as indicated to answer the following questions. a) If there is no tax, the equilibrium price is $50. If a $15 tax paid on sellers is implemented, the buyer will pay $ burden of the tax (Click to select) and the b) Suppose the supply curve gradually changed to become more elastic with the original equilibrium…
Doyle and Samphantharak (2008) find that when a 5% gas tax is implemented, prices consumers pay for gas increase by about 4%. What role does demand elasticity play in determining the size of this price change? That is, under what demand elasticity cases would the price change be closer to 5%, or closer to 0%? Illustrate and explain using supply-and-demand graph(s)..
Now assume the government raises the tax from $1.00 to $1.50. This causes sale to decline from 10,000 units to 5,000 units. a) calculate the price(tax) elasticity of demand. b) is it elastic, inelastic, or unit elastic? c) what happens to total tax revenue?
Using the supply and demand data for wheat below, what would happen if the government placed a $3 per bushel tax on wheat? Bushels demanded 45 50 56 61 67 Price per bushel $6 $5 $4 LA LA LA $3 $2 Bushels supplied 77 73 68 61 57 O the producer price would fall, the consumer price would rise, and the quantity sold would increase. The producer price would fall, the consumer price would rise, and the equilibrium quantity would fall O Both the consumer price and the producer price would rise the consumer price would rise by less than $3 while the producer price would fall by more than $3 O the equilibrium consumer price would rise by $3

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