7. Effect of a tax on buyers and sellers The following graph shows the weekly market for craft beer in some hypothetical economy. Suppose the government levies a tax of $11.60 per case. The tax places a wedge between the price buyers pay and the price sellers receive. PRICE (Dollars per case) 50 45 40 35 30 25 20 15 10 5 0 - 0 Before Tax After Tax Buyers Sellers Tax Wedge Supply Demand 50 100 150 200 250 300 350 400 450 500 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 (Cases of craft beer) ? Price Buyers Pay Price Sellers Receive (Dollars per case) (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.

7. Effect of a tax on buyers and sellers The following graph shows the weekly market for craft beer in some hypothetical economy. Suppose the government levies a tax of $11.60 per case. The tax places a wedge between the price buyers pay and the price sellers receive. PRICE (Dollars per case) 50 45 40 35 30 25 20 15 10 5 0 - 0 Before Tax After Tax Buyers Sellers Tax Wedge Supply Demand 50 100 150 200 250 300 350 400 450 500 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 (Cases of craft beer) ? Price Buyers Pay Price Sellers Receive (Dollars per case) (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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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