Effect of a tax on buyers and sellers The following graph shows the daily market for wine when the tax on sellers is set at $0 per bottle. Suppose the government institutes a tax of $23.20 per bottle, to be paid by the seller. (Hint: To see the impact of the tax, enter the value of the tax in the Tax on Sellers field and move the green line to the after-tax equilibrium by adjusting the value in the Quantity field. Then enter zero in the Tax on Sellers field. You should see a tax wedge between the price buyers pay and the price sellers receive.) Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per bottle) 200 180 160 140 120 100 80 40 20 0 I + I I Demand Supply 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Bottles of wine) Graph Input Tool Market for Wine Quantity (Bottles of wine) Demand Price (Dollars per bottle) 50 300.00 Supply Price (Dollars per bottle) Supply Shifter Tax on Sellers (Dollars per bottle) ? 68.00 0.00

Effect of a tax on buyers and sellers The following graph shows the daily market for wine when the tax on sellers is set at $0 per bottle. Suppose the government institutes a tax of $23.20 per bottle, to be paid by the seller. (Hint: To see the impact of the tax, enter the value of the tax in the Tax on Sellers field and move the green line to the after-tax equilibrium by adjusting the value in the Quantity field. Then enter zero in the Tax on Sellers field. You should see a tax wedge between the price buyers pay and the price sellers receive.) Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per bottle) 200 180 160 140 120 100 80 40 20 0 I + I I Demand Supply 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Bottles of wine) Graph Input Tool Market for Wine Quantity (Bottles of wine) Demand Price (Dollars per bottle) 50 300.00 Supply Price (Dollars per bottle) Supply Shifter Tax on Sellers (Dollars per bottle) ? 68.00 0.00

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter6: Supply, Demand And Government Policies

Section: Chapter Questions

Problem 10PA

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Similar questions

In a market where the supply curve is perfectly inelastic how does an excise tax affect the price paid by consumers and the quantity bought and sold?
Under which circumstances does line tax burden fall entirely on consumers?
What is total surplus? How is it illustrated on a demand and supply diagram?
If a price floor benefits producers, why does a price floor reduce social surplus?
What is the relationship between total surplus and economic efficiency?
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.
9. Effect of a tax on buyers and sellers The following graph shows the dally market for jeans when the tax on sellers is set at $0 per pair. Suppose the government institutes a tax of $40.60 per pair, to be paid by the seller. (Hint: To see the impact of the tax, enter the value of the tax in the Tax on Sellers field and move the green line to the after-tax equilibrium by adjusting the value in the Quantity field. Then, enter zero in the Tax on Sellers field. You should see a tax wedge between the price buyers pay and the price sellers receive.) Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool 200 Market for Jeans 180 IQuantity Pairs of jeans) Demand Price (Dellars per pair) 60 160 Susply Supply Price (Dolars per pair) 140 132.00 0.00 120 100 Supply Shifter…
12. Effect of a tax on buyers and sellers The following graph shows the daily market for shoes when the tax on sellers is set at $0 per pair. Suppose the government institutes a tax of $11.60 per pair, to be paid by the seller. (Hint: To see the impact of the tax, enter the value of the tax in the Tax on Sellers field and move the green line to the after-tax equilibrium by adjusting the value in the Quantity field. Then enter zero in the Tax on Sellers field. You should see a tax wedge between the price buyers pay and the price sellers receive.) Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per pair) 100 90 80 70 60 50 40 30 20 10 0 Demand Before Tax After Tax 0 100 200 300 400 500 600 700 800 900 1000 QUANTITY (Pairs of shoes) Buyers Sellers Supply Tax…
How would I solve this question?: suppose demand for cigarettes is inelastic and supply of cigarettes is elastic. Who would bear the larger share of the burden of a tax placed on cigarettes? Include supply and demand diagram that depicts situation
5. Calculating tax incidence Suppose that the local government of Santa Fe decides to institute a tax on seltzer consumers. Before the tax, 20,000 packs of seltzer were sold ever week at a price of $11 per pack. After the tax, 14,000 packs of seltzer are sold every week; consumers pay $14 per pack (including the tax), and producers receive $7 per pack. The amount of the tax on a pack of seltzer is $ burden that falls on producers is $ O True per pack. True or False: The effect of the tax on the quantity sold would have been the same as if the tax had been levied on producers. False per pack. Of this amount, the burden that falls on consumers is $ per pack, and the
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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 $23.20 per case. The tax places a wedge between the price buyers pay and the price sellers receive. PRICE (Dollars per case) 100 90 80 70 60 Tax Wedge 50 40 30 20 10 Supply Demand 0 0 10 20 30 40 50 60 70 80 90 100 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 (Dollars per case) Price Sellers Receive (Dollars per case) Before Tax After Tax 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. Buyers Sellers Tax Burden (Dollars per…