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Among the tax proposals regularly considered by Congress is an additional tax on distilled liquors. The tax would not apply to beer. The price elasticity
Among the tax proposals regularly considered by Congress is an additional tax on distilled liquors. The tax would not apply to beer. The price elasticity of supply of liquor is 3.5, and the price elasticity of demand is - 0.2. The cross-elasticity of demand for beer with respect to the price of liquor is 0.1. If the new tax is imposed, who will bear the greater burdenliquor suppliers or liquor consumers? Liquor consumers pay D percent and liquor suppliers pay D percent of the tax. (Enter your responses rounded to one decimal place.)
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