Question
the supply and demand curves for new vinyl LPs were given by Ps = 15 0.65Qs and Pd = 36 0.65Qd, where P is in
the supply and demand curves for new vinyl LPs were given by Ps = 15 0.65Qs and Pd = 36 0.65Qd, where P is in dollars and Q represents millions of LPs sold. Suppose that a na- tionwide tax of $3 is levied on each LP sold, collected from the seller.
a. What fraction of the tax does the seller bear?
b. What fraction of the tax does the buyer bear?
c. What about the supply and demand curves explains the division of the tax burden?
d. Does the calculated effect of the tax seem large or small to you? If, in real life, a similar tax turned out to have a larger or smaller effect on sales, what does this suggest about what might have been "wrong" about the supply and demand curves?
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