Question

PROBLEM #6 The equilibrium price of cars in Boston in an unregulated automobile market is $25,000 per car, and the equilibrium quantity is 20,000 cars per year. Assume that the elasticities of supply and demand are equal. a) Using our supply-and-demand framework, graph the market in its initial equilibrium. Graphpaper is readily available at http://www.printfreegraphpaper.com/. b) The government imposes a $6,000 tax on suppliers. Draw the post-tax supply curve, and calculate how much of the tax is borne by producers and consumers. (Hint: remember that the elasticities of supply and demand are equal).

Answer 1

Supply 28000 2 5000 22000 20000 37 h gout imposes a $60oota a on suppliers, then $300 o of tax is borne by producer 4 $3000 of tax is borne by consumer ble consumer share - since Es-es hoducer share which means consumer share = Roduch share.