### 7. Effect of a Tax on Buyers and SellersThe following graph shows the daily market for jeans. Suppose the government institutes a tax of $20.30 per pair. This tax creates a wedge between the price buyers pay and the price sellers receive.#### Graph Description:- **Axes:** - The vertical axis represents the price (in dollars per pair of jeans). - The horizontal axis represents the quantity (in pairs of jeans).- **Curves:** - **Demand Curve (Blue):** Slopes downward from left to right, indicating a decrease in quantity demanded as price increases. - **Supply Curve (Orange):** Slopes upward from left to right, representing an increase in quantity supplied as price increases.- **Tax Wedge:** - A vertical line between the demand and supply curves, indicating the difference in price between what buyers pay and what sellers receive. - The wedge is marked with a dollar amount in a black box ($0, $0), illustrating the effect of a tax.#### Task:Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax:| | Quantity (Pairs of jeans) | Price Buyers Pay (Dollars per pair) | Price Sellers Receive (Dollars per pair) ||-----------------------|---------------------------|-------------------------------------|------------------------------------------|| **Before Tax** | | | || **After Tax** | | | |Using the data from the table, calculate the tax burden for buyers and sellers, respectively, and calculate the price elasticity of demand and supply using the midpoint method. Enter your results in the following table:| | Tax Burden (Dollars per pair) | Elasticity ||-------------------------------|-------------------------------|----------------|| **Buyers** | | || **Sellers** | | |The burden of the tax falls more heavily on the ______ elastic side of the market.

Equilibrium quantity and price is determined where market demand is equal to market supply. When…

7. Effect of a tax on buyers and sellers The following graph shows the daily market for jeans. Suppose the government institutes a tax of $20.30 per pair. This places a wedge between the price buyers pay and the price sellers receive. 100 90 80 Demand Supply 70 50, 50 60 Тая Wedye 40 30 20 10 30 40 50 QUANTITY (Pairs of jearn) 10 20 70 90 100 Fill in the following table with the quantity sold, the price buyers pay, and the price selers receive before and after the tax. Quantity Price Buyers Pay Price Sellers Receive (Pairs of jeans) (Dollars per pair) (Dollars per pair) Before Tax After Tax Using the data you entered in 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. Таx Burden (Dollars per pair) Elasticity Buyers Sellers The burden of the tax falls more heavily on the elastic side of the market. PRICE (Dolars per pair)

7. Effect of a tax on buyers and sellers The following graph shows the daily market for jeans. Suppose the government institutes a tax of $20.30 per pair. This places a wedge between the price buyers pay and the price sellers receive. 100 90 80 Demand Supply 70 50, 50 60 Тая Wedye 40 30 20 10 30 40 50 QUANTITY (Pairs of jearn) 10 20 70 90 100 Fill in the following table with the quantity sold, the price buyers pay, and the price selers receive before and after the tax. Quantity Price Buyers Pay Price Sellers Receive (Pairs of jeans) (Dollars per pair) (Dollars per pair) Before Tax After Tax Using the data you entered in 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. Таx Burden (Dollars per pair) Elasticity Buyers Sellers The burden of the tax falls more heavily on the elastic side of the market. PRICE (Dolars per pair)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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