Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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 $23.20 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 eld. Then, enter zero in the Tax on Sellers eld. 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 eld will change accordingly. Graph Input Tool 200 Market for Shoes 180 Quantity 50 (Pairs of shoes) 160 Supply Demand Price 300.00 Supply Price 68.00 140 (Dollars per pair) (Dollars per pair) 120 100 Supply Shifter PRICE (Dollars per pair) 80 Tax on Sellers 0.00 60 Demand (Dollars per pair) 40 20 O 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Pairs of shoes)Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity Price Buyers Pay Price Sellers Receive (Pairs of shoes) (Dollars per pair) (Dollars per pair) Before Tax After Tax Using the data you entered in the previous table, calculate the tax incidence borne by buyers and sellers, respectively, and calculate the price elasticity of demand and supply between the initial equilibrium quantity and the after-tax equilibrium quantity using the midpoints formula. Enter your results in the following table. Tax Incidence ( Dollars per pair) Elasticity Buyers v Sellers v The tax incidence lies more heavily on the V elastic side of the market
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