Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity Price Buyers Pay (Bottles of wine) (Dollars per bottle) Price Sellers Receive (Dollars per bottle) 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. Buyers Sellers Tax Burden (Dollars per bottle) Elasticity The burden of the tax falls more heavily on the elastic side of the market.

Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity Price Buyers Pay (Bottles of wine) (Dollars per bottle) Price Sellers Receive (Dollars per bottle) 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. Buyers Sellers Tax Burden (Dollars per bottle) Elasticity The burden of the tax falls more heavily on the elastic side of the market.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

G, 6

Economics

Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax.
Quantity
Price Buyers Pay
(Bottles of wine) (Dollars per bottle)
Price Sellers Receive
(Dollars per bottle)
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.
Buyers
Sellers
Tax Burden
(Dollars per bottle) Elasticity
The burden of the tax falls more heavily on the
elastic side of the market.

5. Effect of a tax on buyers and sellers
The following graph shows the daily market for wine. Suppose the government institutes a tax of $40.60 per bottle. This places a wedge between the
price buyers pay and the price sellers receive.
PRICE (Dollars per bottle)
200
180
160
140
120
100
80
60
40
20
0
0
Demand
10
Tax Wedge
20
++
Supply
30 40 50 60 70
QUANTITY (Bottles of wine)
80
90 100
?

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