The following graph shows the daily market for wine. Suppose the government institutes a tax of $46.40 per bottle. This places a wedge between the price buyers pay and the price sellers receive. PRICE (Dollars per bote) 200 180 160 140 120 100 80 60 40 20 0 Tax Wedge Before Tax After Tax Buyers Sellers Demand D 50 100 150 200 250 300 350 400 450 500 QUANTITY (Bottles of wine) Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity Price Buyers Pay (Bottles of wine) (Dollars per bottle) Price Sellers Receive (Dollars per bottle) Supply Using the data you entered in the previous table, calculate the tax burden that falls on buyers and on 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. Tax Burden (Dollars per bottle) Elasticity The burden of the tax falls more heavily on the ? elastic side of the market.

The following graph shows the daily market for wine. Suppose the government institutes a tax of $46.40 per bottle. This places a wedge between the price buyers pay and the price sellers receive. PRICE (Dollars per bote) 200 180 160 140 120 100 80 60 40 20 0 Tax Wedge Before Tax After Tax Buyers Sellers Demand D 50 100 150 200 250 300 350 400 450 500 QUANTITY (Bottles of wine) Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity Price Buyers Pay (Bottles of wine) (Dollars per bottle) Price Sellers Receive (Dollars per bottle) Supply Using the data you entered in the previous table, calculate the tax burden that falls on buyers and on 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. Tax Burden (Dollars per bottle) Elasticity The burden of the tax falls more heavily on the ? elastic side of the market.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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