6.Suppose a $ 60 per unit tax on gasoline is place on the seller and assume that the demand curve for gasoline is perfectly inelastic and the supply curve is elastic. Assume that the equilibrium price on gasoline is $120 and the equilibrium quantity of gasoline before the tax is implemented is 200,000 units. Please answer the following questions below using a supply and demand graph and words. As a result of the $60 per unit tax being placed on the sellers, did the supply curve shift to the left or to the right? What happened to the equilibrium price and equilibrium quantity of gasoline after the $60 per unit tax was implemented? Who pays most or all of the burden of the $60 tax, the buyer or the seller, and WHY? Please calculate the tax revenue collected by the government. Please show your work and calculation. Did the government make the right decision in implementing the $60 per unit tax on the sellers? Why or why not? Explain.

The perfectly inelastic demand is a vertical demand curve, in which the consumer demands same…

Answered: 6.Suppose a $ 60 per unit tax on…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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6.Suppose a $ 60 per unit tax on gasoline is place on the seller and assume that the demand curve for gasoline is perfectly inelastic and the supply curve is elastic. Assume that the equilibrium price on gasoline is $120 and the equilibrium quantity of gasoline before the tax is implemented is 200,000 units. Please answer the following questions below using a supply and demand graph and words.

As a result of the $60 per unit tax being placed on the sellers, did the supply curve shift to the left or to the right? What happened to the equilibrium price and equilibrium quantity of gasoline after the $60 per unit tax was implemented? Who pays most or all of the burden of the $60 tax, the buyer or the seller, and WHY?
Please calculate the tax revenue collected by the government. Please show your work and calculation.
Did the government make the right decision in implementing the $60 per unit tax on the sellers? Why or why not? Explain.

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