9. Effect of a tax on buyers and sellers

The following graph shows the daily market for shoes when the tax on sellers is set at $0 per pair.

Suppose the government institutes a tax of $20.30 per pair, to be paid by the seller. (Hint: To see the impact of the tax, enter the value of the tax in the Tax on Sellers field and move the green line to the after-tax equilibrium by adjusting the value in the Quantity field. Then, enter zero in the Tax on Sellers field. You should see a tax wedge between the price buyers pay and the price sellers receive.)

Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.

Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.

Graph Input Tool 100 Market for Shoes 90 Quantity 10 80 Supply (Pairs of shoes) Demand Price 66.00 Supply Price 0.00 70 (Dollars per pair) (Dollars per pair) 60 50 Supply Shifter PRICE (Dollars per pair) 40 Demand Tax on Sellers 0.00 30 (Dollars per pair) 20 10 O 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Pairs of shoes)