Effect of a tax on buyers and sellersThe following graph shows the daily market for jeans. Suppose the government institutes a tax of $23.20 per pair. This places a wedge between the price buyers pay and the price sellers receive. 7. Effect of a tax on buyers and sellersThe following graph shows the daily market for jeans. Suppose the government institutes a tax of $23.20 per pair. This places a wedge between theprice buyers pay and the price sellers receive.(?100908042,70Supply7060Tax Wedge+50,5042,46.850403010Demand102030405060708090100QUANTITY (Pairs of jeans)PRICE (Dollars per pair)20 Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax.QuantityPrice Buyers PayPrice Sellers Receive(Pairs of jeans)(Dollars per pair)(Dollars per pair)Before TaxAfter TaxUsing the data you entered in the previous table, calculate the tax burden that falls on buyers and on sellers, respectively, and calculate the priceelasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table.Tax Burden(Dollars per pair)ElasticityBuyers0.52, 1.04, 1.92, 2.63Sellers0.52, 0.38, 1.32, 2.63The burden of the tax falls more heavily on theelastic side of the market.less,moreGrade It NowSave & ContinueContinue without saving

Price elasticity of demand measures how the change in a product’s price affects its associated…

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Effect of a tax on buyers and sellers

The following graph shows the daily market for jeans. Suppose the government institutes a tax of $23.20 per pair. This places a wedge between the price buyers pay and the price sellers receive.

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
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.
Tax Burden
(Dollars per pair)
Elasticity
Buyers
0.52, 1.04, 1.92, 2.63
Sellers
0.52, 0.38, 1.32, 2.63
The burden of the tax falls more heavily on the
elastic side of the market.
less,more
Grade It Now
Save & Continue
Continue without saving

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