Q97Before the imposition of a tax, the equilibrium price and quantity are $15 and 100, respectively. After the imposition of a unit tax of $3, the market equilibrium adjusts to a price of $18 and quantity of 100. Based on this information, ...a.Price elasticity of supply is 0 and therefore the entire tax incidence falls on the consumer.b.Price elasticity of supply is 1 and therefore the entire tax incidence falls on the seller.c.Price elasticity of demand is 1 and therefore the tax incidence falls entirely on the seller.d.Price elasticity of demand is 0 and therefore the entire tax incidence falls on the consumer.e.The tax incidence is shared equally by the seller and the consumer.

Answered: Q97 Before the imposition of a tax,…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Q97

Before the imposition of a tax, the equilibrium price and quantity are $15 and 100, respectively. After the imposition of a unit tax of $3, the market equilibrium adjusts to a price of $18 and quantity of 100. Based on this information, ...

Price elasticity of supply is 0 and therefore the entire tax incidence falls on the consumer.

Price elasticity of supply is 1 and therefore the entire tax incidence falls on the seller.

Price elasticity of demand is 1 and therefore the tax incidence falls entirely on the seller.

Price elasticity of demand is 0 and therefore the entire tax incidence falls on the consumer.

The tax incidence is shared equally by the seller and the consumer.

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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