Question

1.Show the effect of a per unit tax on sellers of a good with a relatively...

1.Show the effect of a per unit tax on sellers of a good with a relatively elastic supply and a relatively inelastic demand. Show the tax incidence for buyers and sellers and the deadweight loss. Who pays more of this tax?

2..On two graphs, show the effect of a price floor on some good in the short run and in the long run. Indicate the shortage or surplus (whichever it is…..) and the deadweight loss. Is the effect longer in the short run or the long run?

(please answer both 2 questions please)

Homework Answers

Answer #1

1) Tax burden will fall on consumer

Because greater the elasticity of supply more will be the burden falls on the consumer with inelastic demand curve.

And greater elasticity leads to more dead weight loss.

Lesser the elasticity (more inelastic), smaller will be dead weight loss.

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