18 S. 16 14 12 10 8. D 6 4 2 0 1 2 3 4 5 6 7 8 9. 10 11 12 Quantity Suppose that supply and demand at a market are represented by curves S and D at the figure above (notice that the vertical axis grid has increments of $2) and then a tax of $6 dollars per unit is imposed on buyers. What is the tax burden on the sellers? $8 O $6 $4 O $2 Price 20
18 S. 16 14 12 10 8. D 6 4 2 0 1 2 3 4 5 6 7 8 9. 10 11 12 Quantity Suppose that supply and demand at a market are represented by curves S and D at the figure above (notice that the vertical axis grid has increments of $2) and then a tax of $6 dollars per unit is imposed on buyers. What is the tax burden on the sellers? $8 O $6 $4 O $2 Price 20
Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN:9781305971493
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter8: Application: The Cost Of Taxation
Section: Chapter Questions
Problem 4PA
Related questions
Question
![20
18
S
16
14
12
10
8
D
4
2
0 +
0 1 2
3 4
5 6 7 8 9 10 11 12
Quantity
Suppose that supply and demand at a market are represented by curves S and D at
the figure above (notice that the vertical axis grid has increments of $2) and then a
tax of $6 dollars per unit is imposed on buyers.
What is the tax burden on the sellers?
$8
$6
$4
$2
Price](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4c6c3461-7492-496f-98bc-6ef78f2648e2%2Fc40fe9a0-83d7-4a2f-940a-a22bf458e5c8%2Fiq65rka_processed.png&w=3840&q=75)
Transcribed Image Text:20
18
S
16
14
12
10
8
D
4
2
0 +
0 1 2
3 4
5 6 7 8 9 10 11 12
Quantity
Suppose that supply and demand at a market are represented by curves S and D at
the figure above (notice that the vertical axis grid has increments of $2) and then a
tax of $6 dollars per unit is imposed on buyers.
What is the tax burden on the sellers?
$8
$6
$4
$2
Price
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
Step 1
Answer:
According to the above figure, before tax, the sellers were receiving the equilibrium price of $12. After a tax of $6 on buyers, the demand curve shifts down by 6 units and the new equilibrium occurs at point E. The price received by sellers will be the new equilibrium price i.e. $10.
The burden of tax on sellers = Equilibrium price - Price received after tax
Burden of tax on sellers = 12 - 10 = $2
The price received by sellers has decreased by $2 which means the tax burden falls on sellers is 2.
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