Suppose the government institutes a tax of $5.80 per pair, to be paid by the seller. (Hint: To see the impact of the tax, enter the value of the tax in the Tax on Sellers field and move the green line to the after-tax equilibrium by adjusting the value in the Quantity field. Then enter zero in the Tax on Sellers field. You should see a tax wedge between the price buyers pay and the price sellers receive.) Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per pair) 50 8. G४ 45 40 2 8 2 25 35 30 20 15 0 H 0 4 Demand 1 1 Supply 10 20 30 40 50 60 70 80 90 100 QUANTITY (Pairs of shoes) Graph Input Tool Market for Shoes Quantity (Pairs of shoes) Demand Price (Dollars per pair) 10 75.00 Supply Price (Dollars per pair) Supply Shifter Tax on Sellers (Dollars per pair) 17.00 0.00 Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax.

Suppose the government institutes a tax of $5.80 per pair, to be paid by the seller. (Hint: To see the impact of the tax, enter the value of the tax in the Tax on Sellers field and move the green line to the after-tax equilibrium by adjusting the value in the Quantity field. Then enter zero in the Tax on Sellers field. You should see a tax wedge between the price buyers pay and the price sellers receive.) Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per pair) 50 8. G४ 45 40 2 8 2 25 35 30 20 15 0 H 0 4 Demand 1 1 Supply 10 20 30 40 50 60 70 80 90 100 QUANTITY (Pairs of shoes) Graph Input Tool Market for Shoes Quantity (Pairs of shoes) Demand Price (Dollars per pair) 10 75.00 Supply Price (Dollars per pair) Supply Shifter Tax on Sellers (Dollars per pair) 17.00 0.00 Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the 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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Question

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The following graph shows the daily market for shoes when the tax on sellers is set at $0 per pair.
Suppose the government institutes a tax of $5.80 per pair, to be paid by the seller. (Hint: To see
the impact of the tax, enter the value of the tax in the Tax on Sellers field and move the green line
to the after-tax equilibrium by adjusting the value in the Quantity field. Then enter zero in the Tax
on Sellers field. You should see a tax wedge between the price buyers pay and the price sellers
receive.)
Use the graph input tool to help you answer the following questions. You will not be graded on any
changes you make to this graph.
Note: Once you enter a value in a white field, the graph and any corresponding amounts in each
grey field will change accordingly.
PRICE (Dollars per pair)
84 292 8 2 2515
50
45
40
35
30
0
0
Demand
11
T
1
Supply
10 20 30 40 50 60 70 80 90 100
QUANTITY (Pairs of shoes)
Graph Input Tool
Market for Shoes
Quantity
(Pairs of shoes)
Quantity
(Pairs of
shoes)
Demand
Price
(Dollars per
pair)
10
Price Buyers Pay
(Dollars per pair)
75.00
Supply
Price
(Dollars per
pair)
Supply Shifter
Tax on
Sellers
(Dollars per
pair)
Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive
before and after the tax.
17.00
Price Sellers Receive
(Dollars per pair)
0.00

Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive
before and after the tax.
Before Tax
After Tax
Quantity
Price Buyers Pay Price Sellers Receive
(Pairs of shoes) (Dollars per pair) (Dollars per pair)
Using the data you entered in the previous table, calculate the tax burden that falls on buyers and
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 pair) Elasticity
The burden of the tax falls more heavily on the
elastic side of the market.

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