The initial diagram has two panels.The left graph depicts a perfectly inelastic demand curve. The right graph depicts a relatively flat sloped demand curve. The initial equilibrium in each graph is labeled point A. We will impose a $3 per unit tax in the left graph, and a $4 per unit tax in the right graph.
Make a copy of the graph, then follow the below instructions to draw the graph:
1. In the left graph $3 above and parallel to the original supply curve, draw a new supply curve, put a black dot at the new equilibrium and label it as point B.
2. Draw a vertical arrow between the two supply curves, and label it as a $3 Tax.
3. Shade the rectangle representing the rectangle for the tax burden on the buyer.
4 In the right graph $4 above and parallel to the original supply curve, draw a new supply curve, put a black dot at the new equilibrium and label it as point B.
5. Draw a vertical arrow between the two supply curves, and label it as a $4 Tax.
6. Shade the rectangles representing the rectangle for the tax burden on the buyer, and the seller, respectively.
Answer -4 Correct option is $4.
Producer Burden is 4(3-2) = 4
Answer-5 Correct option is $15
Total tax collected is 5(5-2) = 15
Answer-6 Correct option is $16
Total tax collected is 4(6-2) = 16.
The initial diagram has two panels.The left graph depicts a perfectly inelastic demand curve. The right graph depicts a...
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