Chapter 08 Homework
RICE (Dol
PRIC
40
30
20
10
Tax Wedge
+
0
0 10 20 30 40 50 60 70 80 90 100
QUANTITY (Pairs of sweatpants)
Complete the following table by filling in the quantity sold, the price buyers pay, and the price sellers receive before and after the tax.
Quantity
Price Buyers Pay
Price Sellers Receive
(Dollars per pair)
(Pairs of sweatpants) (Dollars per pair)
Before Tax
After Tax
Using your answers from the previous table, calculate the tax burden that falls on buyers and on sellers, respectively, and calculate the price elasticity
of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table.
Tax Burden
(Dollars per pair) Elasticity
Buyers
Sellers
The tax burden falls more heavily on the side of the market that is
? elastic.