Suppose a good costs $5. Then, the government imposes a $2 tax on the good. What will the after-tax price be? (Give a range if you can't determine an exact value.) Assume the demand curve is steeper than the supply curve. Who will be burdened more by a tax?

Suppose a good costs $5. Then, the government imposes a $2 tax on the good. What will the after-tax price be? (Give a range if you can't determine an exact value.) Assume the demand curve is steeper than the supply curve. Who will be burdened more by a tax?

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter5: Elasticity Of Demand And Supply

Section5.A: Appendix: Price Elasticity And Tax Incidence

Problem 1AQ

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Suppose a good costs $5. Then, the government imposes a $2 tax on the good. What will the
after-tax price be? (Give a range if you can't determine an exact value.)
Assume the demand curve is steeper than the supply curve. Who will be burdened more by a tax?

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