istrict.instructure.com/courses/100715/quizzes/619020/take Ents O laws governing sales taxes in a country. Question 27 (Figure: Market) In the market shown, the original equilibrium price is 60 cents. A tax is then implemented on the buyer. After the introduction of the tax, the equilibrium quantity in this market units. by Price $0.90 $0.64 $0.60 $0.58 O increased, 4 O decreased, 4 increased, 6 -- Quiz: Minute 116 120 Supply Old demand New demand Quantity 4 1 pts All

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Can you help with question 27? I don’t understand it. The given multiple choice answers are : -Increased, 4 -Decreased, 4 -Increased, 6 -Decreased, 6
**Question 27**

(Figure: Market) In the market shown, the original equilibrium price is 60 cents. A tax is then implemented on the buyer. After the introduction of the tax, the equilibrium quantity in this market _____ by _____ units.

- Graph Explanation:
  - The vertical axis represents the Price, ranging from $0.58 to $0.90.
  - The horizontal axis represents the Quantity, marked at 116 and 120 units.
  - There are three lines on the graph:
    - **Supply** (red line) slopes upwards from left to right.
    - **Old Demand** (blue line) slopes downwards from left to right.
    - **New Demand** (brown line) also slopes downwards but is shifted left, indicating a decrease in demand due to the tax.

- Observations:
  - The intersection of the Supply and Old Demand lines indicates the original equilibrium price of $0.60.
  - The New Demand line intersects the Supply line at a lower quantity level.

Options:
- ○ increased, 4
- ○ decreased, 4
- ○ increased, 6

The correct answer needs to be determined based on the graph's details.
Transcribed Image Text:**Question 27** (Figure: Market) In the market shown, the original equilibrium price is 60 cents. A tax is then implemented on the buyer. After the introduction of the tax, the equilibrium quantity in this market _____ by _____ units. - Graph Explanation: - The vertical axis represents the Price, ranging from $0.58 to $0.90. - The horizontal axis represents the Quantity, marked at 116 and 120 units. - There are three lines on the graph: - **Supply** (red line) slopes upwards from left to right. - **Old Demand** (blue line) slopes downwards from left to right. - **New Demand** (brown line) also slopes downwards but is shifted left, indicating a decrease in demand due to the tax. - Observations: - The intersection of the Supply and Old Demand lines indicates the original equilibrium price of $0.60. - The New Demand line intersects the Supply line at a lower quantity level. Options: - ○ increased, 4 - ○ decreased, 4 - ○ increased, 6 The correct answer needs to be determined based on the graph's details.
Expert Solution
Step 1

The new equilibrium is the point where the new demand curve and the supply curve intersect each other 

As can be seen from the diagram the new demand curve and the supply curve when intersect at that point the equilibrium quantity is 116 units.

Before the tax the equilibrium quantity was 120 units ( where the old demand curve and supply curve intersect) 

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