MICROECONOMICS (LL)-W/ACCESS >CUSTOM<
MICROECONOMICS (LL)-W/ACCESS >CUSTOM<
11th Edition
ISBN: 9781264207718
Author: Colander
Publisher: MCG CUSTOM
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Chapter 7.1, Problem 4Q
To determine

Explain how much fraction of tax is borne by suppliers.

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The reason which determines the elasticity of tax burden on buyers and sellers.
Suppose an economist estimates the price elasticity of demand for sugary drinks is -4.2, while its price elasticity of supply is 1.2. If the government decides to impose a per-unit tax of $9 per can of sugary drinks sold, how would the market price of sugary drinks be affected? Show your calculation
2. The elasticity of demand for guitars is -2.0, and the elasticity of supply is 3.0. How much will the price of guitars change with a per-unit tax of $2?
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