7. Effect of a tax on buyers and sellers The following graph shows the daily market for wine. Suppose the government Ins

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7 Effect Of A Tax On Buyers And Sellers The Following Graph Shows The Daily Market For Wine Suppose The Government Ins 1 (50.75 KiB) Viewed 35 times

7. Effect of a tax on buyers and sellers The following graph shows the daily market for wine. Suppose the government Institutes a tax of $46.40 per bottle. This places a wedge between the price buyers pay and the price sellers receive. 200 180 160 Supply 140 120 Tax Wedge 100 80 60 40 20 Demand 0 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Bottles of wine) Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity Price Buyers Pay Price Sellers Receive (Bottles of wine) (Dollars per bottle) (Dollars per bottle) Before Tax After Tax Using the data you entered in 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 bottle) Elasticity Buyers Sellers The burden of the tax falls more heavily on the elastic side of the market. PRICE (Dollars per bottle)