7. Effect of a tax on buyers and sellers

The following graph shows the daily market for jeans. Suppose the government institutes a tax of $46.40 per pair. This places a wedge between the price buyers pay and the price sellers receive.

200 180 160 140 Supply 120 Tax Wedge D100 80 60 40 20 Demand 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Pairs of jeans) 8 Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. QuantityPrice Buyers Pay Pairs of jeans) (Dollars per pair) Price Sellers Receive (Dollars per pair) 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 Sellers The burden of the tax falls more heavily on the elastic side of the market