10. Interaction of price elasticities of demand and supply Aa Aa Suppose the calculator illustrates the market for wine in the United States. The orange (upward-sloping) line represents the market supply of wine, and the blue (downward-sloping) line represents the market demand. Use the calculator to help you answer the following questions. You will not be graded on any changes you make to the calculator. Tool tip: Use your mouse to drag the vertical green line on the graph. The values in the boxes on the right side of the calculator will change accordingly. You can also directly change the values in the boxes with the white background by clicking in the box and typing. The graph and any related values will change accordingly. PRICE (Dollars per bottle) CALCULATOR 100 + Quantity (Bottles of wine) 50 90 - Demand Price (Dollars per bottle) Supply Price (Dollars per bottle) 80 - 90 18 70 - 60- 50 40 Tax on Sellers (Dollars per bottle) 30 - 20 10 50 100 150 200 250 300 350 400 450 500 QUANTITY (Bottles of wine) Reset to Initial Values Calculate The market is initially in equilibrium. Then the government institutes a $9 per bottle tax to be paid by the seller. (Hint: To see the impact of the tax, enter the value of the tax in the box labeled "Tax on Sellers," click the button labeled "Calculate," and then move the green line to the post-tax equilibrium. Then enter zero in the box labeled "Tax on Sellers." You should see a tax wedge between the price buyers pay and the price sellers receive.) Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity Sold Price Buyers Pay Price Sellers Receive (Bottles of wine) ($ per bottle) ($ per bottle) Before tax After tax Using the data you entered in the preceding table, calculate the tax burden that falls on buyers and sellers, respectively, and calculate the price elasticity of demand and supply using the midpoint method. Enter your results in the following table. Buyers Sellers Tax burden ($ per bottle) Elasticity The burden of the tax falls more heavily on the side of the market.
10. Interaction of price elasticities of demand and supply Aa Aa Suppose the calculator illustrates the market for wine in the United States. The orange (upward-sloping) line represents the market supply of wine, and the blue (downward-sloping) line represents the market demand. Use the calculator to help you answer the following questions. You will not be graded on any changes you make to the calculator. Tool tip: Use your mouse to drag the vertical green line on the graph. The values in the boxes on the right side of the calculator will change accordingly. You can also directly change the values in the boxes with the white background by clicking in the box and typing. The graph and any related values will change accordingly. PRICE (Dollars per bottle) CALCULATOR 100 + Quantity (Bottles of wine) 50 90 - Demand Price (Dollars per bottle) Supply Price (Dollars per bottle) 80 - 90 18 70 - 60- 50 40 Tax on Sellers (Dollars per bottle) 30 - 20 10 50 100 150 200 250 300 350 400 450 500 QUANTITY (Bottles of wine) Reset to Initial Values Calculate The market is initially in equilibrium. Then the government institutes a $9 per bottle tax to be paid by the seller. (Hint: To see the impact of the tax, enter the value of the tax in the box labeled "Tax on Sellers," click the button labeled "Calculate," and then move the green line to the post-tax equilibrium. Then enter zero in the box labeled "Tax on Sellers." You should see a tax wedge between the price buyers pay and the price sellers receive.) Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity Sold Price Buyers Pay Price Sellers Receive (Bottles of wine) ($ per bottle) ($ per bottle) Before tax After tax Using the data you entered in the preceding table, calculate the tax burden that falls on buyers and sellers, respectively, and calculate the price elasticity of demand and supply using the midpoint method. Enter your results in the following table. Buyers Sellers Tax burden ($ per bottle) Elasticity The burden of the tax falls more heavily on the side of the market.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Answer the attached question
Transcribed Image Text:10. Interaction of price elasticities of demand and supply
Aa Aa
Suppose the calculator illustrates the market for wine in the United States. The orange (upward-sloping) line represents the market supply of wine,
and the blue (downward-sloping) line represents the market demand. Use the calculator to help you answer the following questions. You will not be
graded on any changes you make to the calculator.
Tool tip: Use your mouse to drag the vertical green line on the graph. The values in the boxes on the right side of the calculator will change
accordingly. You can also directly change the values in the boxes with the white background by clicking in the box and typing. The graph and any
related values will change accordingly.
PRICE (Dollars per bottle)
CALCULATOR
100 +
Quantity
(Bottles of wine)
50
90 -
Demand Price
(Dollars per bottle)
Supply Price
(Dollars per bottle)
80 -
90
18
70 -
60-
50
40
Tax on Sellers
(Dollars per bottle)
30 -
20
10
50 100 150 200 250 300 350 400 450 500
QUANTITY (Bottles of wine)
Reset to Initial Values
Calculate
The market is initially in equilibrium. Then the government institutes a $9 per bottle tax to be paid by the seller. (Hint: To see the impact of the tax,
enter the value of the tax in the box labeled "Tax on Sellers," click the button labeled "Calculate," and then move the green line to the post-tax
equilibrium. Then enter zero in the box labeled "Tax on Sellers." You should see a tax wedge between the price buyers pay and the price sellers
receive.)
Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax.
Quantity Sold
Price Buyers Pay
Price Sellers Receive
(Bottles of wine)
($ per bottle)
($ per bottle)
Before tax
After tax
Using the data you entered in the preceding table, calculate the tax burden that falls on buyers and sellers, respectively, and calculate the price
elasticity of demand and supply using the midpoint method. Enter your results in the following table.
Buyers
Sellers
Tax burden ($ per bottle)
Elasticity
The burden of the tax falls more heavily on the
side of the market.
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