Part 1 Supply

Given below is a diagram (Figure 1) and a set of questions related to Figure 1. Price in dollars on vertical axis and quantity on horizontal axis. Shown are the original supply curve (S1) the after-tax supply curve (S2) and the demand curve (D1).

In the case shown in Figure 1 there is a change in the level of per unit tax that is imposed on a firm. Typically, taxes are imposed on firms and the funds collected from them because there are fewer firms than demanders and because firms are required to keep business records. So as an example, in this case it could be a change in the tax per pack of cigarettes costs:

Please answer the following questions about Figure 1 and submit as a Word document.

1. The dollar amount of the tax is____________
2. The original (no tax) equilibrium price is _______________
3. The original (no tax) equilibrium quantity is_______________
4. The market equilibrium price after the tax is imposed is ____________
5. The amount ($) per unit that suppliers receive after-tax______________
6. The amount ($) per unit that demanders pay after-tax _________________
7. The market equilibrium quantity after the tax is imposed is _________________
8. The change in the equilibrium quantity resulting from the tax________________
9. What percentage of the tax change was shifted to the demanders _______________
10. Which was the more elastic, the supply or the demand (or both the same), and how do you know that?

Figure 1

Figure 1 Tax Collected from Producers Price S Incl. tax S ( no tax) $3.50 $3.30 $3.00 $2.80 ....... D 90 100 QuantityFigure 2 Tax Collected from Consumers Price $3.30 $3.00 $2.80 $2.50 D D Incl. tax No tax 90 100 Quantity