Question

An excise tax introduces a wedge between the price paid by consumers and the price received...

An excise tax introduces a wedge between the price paid by consumers and the price received by producers. Explain who bears the tax burden when 1. The price elasticity of demand is elastic and the price elasticity of supply is inelastic. Draw graphs to represent this condition. 2. The price elasticity of demand is inelastic and the price elasticity of supply is elastic. Draw graphs to represent this condition.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

More inelastic side of the market bears more tax.

Elasticity of supply is perfectly inelastic and demand is elastic and tax is imposed on consumers: Price producer recieve falls from P to P1 which means whole burden is on producers.

Elasticity of demand is inelastic and supply is perfectly elastic and tax is imposed on producers: Price consumer pay rises from P to P1 which means whole burden falls on consumers.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose price elasticity of demand is relatively inelastic for good X. If the price elasticity of...
Suppose price elasticity of demand is relatively inelastic for good X. If the price elasticity of supply for good X is elastic and an excise tax is imposed on good X, who will bear the greater burden of the tax? A. producers B. both consumers and producers equally C. government D. consumers
A higher tax on cigarette companies shifts the supply curve to the left. What happens to...
A higher tax on cigarette companies shifts the supply curve to the left. What happens to the price of the product to consumers when the price elasticity of demand is inelastic and elastic? Draw the graphs to represent both conditions. In which condition do companies pass along more of the higher tax to consumers?
- The impact of tax on markets and welfare distribution. - Use supply and demand diagrams...
- The impact of tax on markets and welfare distribution. - Use supply and demand diagrams to answer the following questions. Draw new diagrams for answers to each part. a- Show that regardless of who the tax is levied on (consumers or producers), a tax increase the price paid by consumers, decrease the price received by producers, and make the market smaller compared with a free market. Notes: You should use two diagrams, one for tax on consumers and one...
A technological breakthrough shifts the supply curve to the right. What happens to the price of...
A technological breakthrough shifts the supply curve to the right. What happens to the price of the product to consumers when the price elasticity of demand is inelastic and elastic? Draw the graphs to represent both conditions. In which condition do consumers save more?
A market in perfect competition is in equilibrium. Let the demand's price elasticity be -1.25 and...
A market in perfect competition is in equilibrium. Let the demand's price elasticity be -1.25 and the price elasticity of the offer is 0.25. If a tax of $ 10 per unit is introduced, who will then carry the largest part of the tax burden? A. Consumers, since demand is relatively more elastic than the supply B. Consumers, then demand. is relatively more inelastic than the supply C. Manufacturers, as the supply is relatively more elastic than demand. D. The...
4A The price elasticity along a negatively sloped linear demand curve 1 changes at every point...
4A The price elasticity along a negatively sloped linear demand curve 1 changes at every point 2 is less than 1 3IS INFINITE 4 is equal to 1 5 is zero 28A If demand curve is more elastic relative to supply sellers pay a larger portion of the excise tax. B. consumer price increases by the amount of the tax. C. entire burden of the tax is borne by the sellers. D. sellers pay a smaller portion of the excise...
The term tax wedge describes: a. The change in the elasticity of demand after the tax...
The term tax wedge describes: a. The change in the elasticity of demand after the tax is in place b. The difference between the market price with a tax and the market price without a tax c. The gap between the what buyers pay and sellers receive after a tax is in place d. The difference between quantity supplied and quantity demand with a new tax Clear my choice Question 8 Not yet answered Points out of 1.00 Flag question...
The price elasticity of demand for paper towels is 0.5 and the price elasticity of supply...
The price elasticity of demand for paper towels is 0.5 and the price elasticity of supply for paper towels is 1.5. If a tax of $0.75 is placed on the producers of paper towels, who bears the biggest burden of the tax? A. Producers. B. Consumers C. The government
The government imposes an excise tax on house paint. The house paint tax incidence takes place...
The government imposes an excise tax on house paint. The house paint tax incidence takes place within a market where the supply of house paint is elastic and the demand for house paint is inelastic. Who pays the most of the excise tax? A) the local government B) consumers of house paint C) the federal government D) producers of house paint
The elasticity of demand for a product is -2.0, and the elasticity of supply is 3.0....
The elasticity of demand for a product is -2.0, and the elasticity of supply is 3.0. How much will the price of the good change with a per-unit tax of $2 on consumers? Who bears the larger burden of the tax, consumers or producers. Explain your answer Include workout please
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT