??(?8?) Using the graph shown, answer the following questions. a. What was the e

Question

??(?8?) Using the graph shown, answer the following questions. a. What was the equilibrium price in this market before the tax? b. What is the amount of the tax? c. How much of the tax will the buyers pay? d. How much of the tax will the sellers pay? e. How much will the buyer pay for the product after the tax is imposed? f. How much will the seller receive after the tax is imposed? g. As a result of the tax, what has happened to the level of market activity? 10 Io Price 10 20 30 40 50 60 70 80 quantity

Explanation / Answer

a) Equilibrium price is $ 6 where demand and supply curve intersects.

b) Tax = 7 - 3 = $ 4

c) Tax paid by buyers = 7 - 6 = $ 1

d) Tax paid by sellers = 6 - 3 = $ 3

e) Buyers pay $ 7 for the product.

f) Sellers receive $ 3 for the product.

g) Market activity declines because consumers decreases its purchases.

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