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- Taxes Overview:
- Tax Incidence
- The division of tax burden
- 3 Cases
- Effects of Taxes
- Taxes on Sellers
- Taxes on Buyers
- Tax Incidence and Elasticity of Demand & Supply
- Perfectly inelastic demand curve
- Perfectly elastic demand curve
- Perfectly inelastic supply curve
- Perfectly elastic supply curve
- Understanding Effects of Taxes on Buyers and Sellers
You have the following information:
Chocolate bars (dollars)
Quantity demanded (thousands per day)
Quantity Supplied (thousands per day)
- If chocolate bars are not taxed, what is the price of a chocolate bars and how many are bought?
- If sellers are taxed $2 dollar a chocolate bar, what is the price? How many are sold? Who pays the taxes?
- If buyers are taxed $2 dollar a chocolate bar, what is the price? How many are bought? Who pays the taxes?
- The demand function for laptops is P = 300 - 2Q, and the supply function is P = 100 + 3Q.
- Understanding Tax Incidence and Elasticity of Demand & Supply
Suppose the demand curve for candy is perfectly inelastic, and a tax is imposed.
- The demand curve is perfectly elastic, and the supply curve is perfectly inelastic. Suppose the equilibrium price is $5, and the equilibrium quantity is 100.