The current equilibrium price and quantity in the chewing gum market are $3 and 156,000 units, respectively. The government introduces a tax of $0.75 per unit which leads to the price that buyers pay to increase to $3.25 and the price that sellers receive to fall to $2.50, while the quantity traded drops to 150,000. 1) Calculate the tax incidence on buyers and sellers. Who bears the largest burden of the tax? 2 ) What is the revenue that the government collects from the tax?
The current
1) Calculate the tax incidence on buyers and sellers. Who bears the largest burden of the tax?
2 ) What is the revenue that the government collects from the tax?
Show all your calculations either in the answer box below or on the file you will upload. If your calculations are on the uploaded file, your final answer should still be in the answer box below. Round your results to two decimal places if needed.
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