Question
5. Product X's demand and supply is shown in graph below. Initial Market equilibrium price for good X is at $8 (E1). Local government decides
5. Product X's demand and supply is shown in graph below. Initial Market equilibrium price for good X is at $8 (E1). Local government decides to impose an excise tax on demanders of good X, to be collected by suppliers of good x, resulting demand to fall from D1 to D2.
Use the graph to answer the following questions. (12 Points)
a) What is the dollar amount of the excise tax per unit on x? $_______________
b) What is the market equilibrium outputdemanded and supplied after the excise tax has been imposed? _____________Q
c) What price do buyers pay for good X after the excise tax has been imposed? $ ____________
d) What price do sellers keep (not receive) after paying the excise tax to the local government? $_______________
e) Look at the graph, what share of the excise tax per unit of X do buyers end up paying? $______________
f) Look at the graph, what share of the excise tax per unit of X do sellers end up paying? $_______________
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