Question
Suppose that the government collects a specific tax of t = N$1.5 per kg of processed beef from beef producers. The equilibrium price and quantities
Suppose that the government collects a specific tax of t = N$1.5 per kg of processed beef from beef producers. The equilibrium price and quantities were 3.50 and 225 respectively. After the imposition of tax, price paid by consumes increase to P = 4.5, quantities decrease to 220, the price received by the sellers dis decrease to P =N$3. (a) What is tax revenue from consumer? (2) (b) What is tax revenue from producers? (2) (c) What is the tax incidence that falls on consumer? (2) (d) What is the tax incidence that falls on the producer? (2) (e) Do you care whether a N$1.5 tax per kg of processed beef is collected from beef producers or from consumers at store? Why? (4) (f) Verify that t s t b 1 , where ts is the seller's share of the tax, and tb is the buyer's share of the tax.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started