The current equilibrium price and quantity in the chocolate market are $5 and 256,000 units, respective. The government introduces a tax of $0.50 per unit which leads to the price that buyers pay to increase to $5.25 and the price that sellers receive to fall to $4.75, while the quantity traded drops to 190,000. Calculate the tax incidence on buyers and sellers. Who bears the a. (- largest burden of the tax? b. ( )What is the revenue that the government collects from the tax?
The current equilibrium price and quantity in the chocolate market are $5 and 256,000 units, respective. The government introduces a tax of $0.50 per unit which leads to the price that buyers pay to increase to $5.25 and the price that sellers receive to fall to $4.75, while the quantity traded drops to 190,000. Calculate the tax incidence on buyers and sellers. Who bears the a. (- largest burden of the tax? b. ( )What is the revenue that the government collects from the tax?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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