Taxation of Markets. PriceQuantity DemandedQuantity Supplied $1.109,0003,000 $1.208,0005,000 $1.307,000 $1.406,0009,000 $1.505,00011,000 Assume no government.

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Presentation transcript:

Taxation of Markets

PriceQuantity DemandedQuantity Supplied $1.109,0003,000 $1.208,0005,000 $1.307,000 $1.406,0009,000 $1.505,00011,000 Assume no government involvement -- What price do consumers pay? How much do consumers purchase? What dollar amount do sellers receive for each unit?

PriceQuantity DemandedQuantity Supplied $1.109,0003,000 $1.208,0005,000 $1.307,000 $1.406,0009,000 $1.505,00011,000 Assume the government adds a $0.30 excise tax on the sellers in the above market -- What price do consumers pay? How much do consumers purchase? What dollar amount do sellers receive for each unit? (HINT: find the new equilibrium)

PriceQuantity DemandedQuantity Supplied $1.109,0003,000 $1.208,0005,000 $1.307,000 $1.406,0009,000 $1.505,00011,000 Assume the government adds a $0.30 excise tax to the above market -- How much does the government collect in tax revenues? What is the tax incidence (who is really paying the $0.30 tax)?