Assume the ZRA decides to impose a new tax on imported vehicles priced above K200, 0 00. The new tax calls for a 15% tax on the higher-priced vehicles. However, the new tax al so causes the demand for vehicles to be cut in half from 1000 to 500 to compensate. Th is massive drop in demand has caused the supplier to cut back on supply from 1500 to 1000. Find a) The elasticity of supply and demand. b) If the tax incidence falls more on the supplier or the consumer (Calculate both the consumer and supplier tax burdens).

Assume the ZRA decides to impose a new tax on imported vehicles priced above K200, 0 00. The new tax calls for a 15% tax on the higher-priced vehicles. However, the new tax al so causes the demand for vehicles to be cut in half from 1000 to 500 to compensate. Th is massive drop in demand has caused the supplier to cut back on supply from 1500 to 1000. Find a) The elasticity of supply and demand. b) If the tax incidence falls more on the supplier or the consumer (Calculate both the consumer and supplier tax burdens).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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