Taxes can be levied on consumers or producers. Demonstrate the effect of a $4 per-unit tax on suppliers on equilibrium price and quantity….
Taxes can be levied on
consumers or producers.
a. Demonstrate the effect of a $4 per-unit tax
on suppliers on equilibrium price and quantity.
Instructions: Draw a parallel shift in the demand or supply
curve(s) over the same quantity range (4 – 20) by grabbing,
dragging, and then dropping the curve(s) to the new position(s).
The price consumers pay
has
(Click to select)
risen
declined
to
(Click to select)
$8
$12
$14
$10
. The price producers receive has
(Click to select)
declined
risen
to
(Click to select)
$14
$10
$12
$8
.
b. Demonstrate the effect of a $4 per-unit tax
on consumers on equilibrium price and quantity.
Instructions: Draw a parallel shift in the demand or supply
curve(s) over the same quantity range (4 – 20) by grabbing, dragging, and
then dropping the curve(s) to the new position(s).
The price consumers
pay has
(Click to select)
risen
declined
to
(Click to select)
$12
$14
$10
$8
.
The price producers receive has
(Click to select)
risen
declined
to
(Click to select)
$12
$14
$10
$8
.
c. How does the impact on equilibrium prices (paid by consumers and received by
producers) and quantity differ between a and b?
| There is no difference. The price consumers pay is lower in both scenarios. | |
| There is no difference. The price consumers pay is higher in both scenarios. | |
| When the tax is placed on producers, the price consumers pay is higher than if the tax were placed on consumers. | |
| When the tax is placed on consumers, the price consumers pay is higher than if the tax were placed on producers. |
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