a) Fill in the Quantity Supplied (after tax) column assuming that a S4 per unit
ID: 1153289 • Letter: A
Question
a) Fill in the Quantity Supplied (after tax) column assuming that a S4 per unit excise tax is imposed on the supplier. Quantity Supplied (after tax) Quantity Supplied (before tax) 60 70 80 90 100 110 Price to Consumers Quantity Demanded 120 110 100 90 80 70 10 12 13 b) What is the equilibrium price and quantity before the tax? Equilibrium Price S0 Equilibrium Quantity 0 c) What is the equilibrium price and quantity after the $4 tax is imposed? Equilibrium Price (after tax) -SO Equilibrium Quantity (after tax)0 d) What portion of the $4 tax is paid by the seller and what portion is paid by the consumer? Seller SO Consumer $0Explanation / Answer
a)
Explaination for quantity supplied after tax :
As we can see the trend of quantity supplied before tax it shows that for every $1 decrease in price reduce the quantity supplied by 10 units so a $4 tax will reduce the price for supplier by $4 and will reduce quantity supplied by 40 units. Thats why at every price the qunatity supplied after tax will decrease by 40 units from the quantity supplied before tax.
b) Equilibrium Price and quantity before tax is where the Quantity demanded = Quantity supplied (before tax)
this is at price $11 where quantity demanded = quantity supplied = 90
Equilibrium Price = $11
Equilibrium Quantity = 90
c) Equilibrium price and equilibrium quantity after tax is impose is where the Quantity demanded = Quantity Supplied (after tax)
this is where at price = $13 where quantity demanded = quantity supplied (after tax) = 70
Equilibrium Price (after tax) = $13
Equilibrium Quantity (after tax) = 70
d) half of the portion of the $4 tax is paid by the seller and half of the portion is paid by the consumer.
it is so because now the price is $13 which was $11 before tax (on equilibrium) so the consumer is paying ($13- $11 = $2) of the $4 tax and the rest $2 from the $4 tax is paid by seller.
Price to Consumers Quantity Demanded Quantity supplied (before tax) Quantity supplied (after tax) $4 per unit 8 120 60 60 -40 = 20 9 110 70 70-40 = 30 10 100 80 80-40 = 40 11 90 90 (Equilibrium before tax) 90-40 = 50 12 80 100 100-40 = 60 13 70 110 110-40 = 70 (Equilibrium after tax)Related Questions
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