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Question: 7 effect of a tax on buyers and sellers the...

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7. Effect of a tax on buyers and sellers The following graph shows the daily market for shoes. Suppose the government institutes a tax of $40.60 per pair. This places a wedge between the price buyers pay and the price sellers receive 200 180 160 Demand Supply 140 120 100 Tax Wedge 0 60 40 20 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Pairs of shoes) Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity (Pairs of shoes) (Dollars per pair)(Dollars per pair) Price Buyers Pay Price Sellers Receive Before Tax After Tax 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 pair) Elasticity Buyers Sellers The burden of the tax falls more heavily on theelastic side of the market. Grade It Now Save & Continue Continue without saving

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