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ECON 10a Lecture Notes - Lecture 8: Economic Equilibrium, Deadweight Loss, Demand Curve

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rubysea-lion113
15 Feb 2017
School
Brandeis University
Department
Economics
Course
ECON 10a
Professor
Coiner Harry( Michael)

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Document Summary

When the supply curve is flat, and the demand curve is steep. The burden of the tax is mostly on the buyer. Price of microwave with tax goes up from 100 to 109. Buyers are paying twenty percent of the tax. When the supply curve is steep and the demand curve is flat. The burden of the tax is mostly on the sellers. Whichever group (buyers or sellers) has the smaller elasticity pays more than 50% of the tax. If the elasticity of demand is 5, and the elasticity of supply is 8. Than the buyers pay more than half the tax. Holding the supply curve and elasticity constant. Given the the supply curve, the larger the elasticity of demand, the smaller the share buyers pay. Given the demand curve the larger the elasticity of supply, the smaller the share sellers pay. By being willing to buy or sell something else. If we put an export tax on mexican goods.

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Related Questions

2. If the government decides to levy a small excise tax on the buyers in a perfectly competitive market in which the elasticity of demand is greater than the elasticity of supply, then we can conclude that: (A) The buyers will bear all of the tax (B) The sellers will bear all of the tax (C) The buyers will bear more of the tax than sellers ((D) The sellers will bear more of the tax than buyers YE) The government will bear most of the tax (F) It is not possible to tell who will bear most of the tax without additional information (G) The tax will be shared equally between the buyers and the sellers (H) There will be a smaller amount of excess burden than there would have been if the elasticity of supply is greater than the elasticity of demand (I) all of the above (J) none of the above

Please explain/prove your answers. Are the following statements true or false?

A. A tax on a market with elastic demand and elastic supply will shrink the market more than a tax on a market with inelastic demand and inelastic supply will shrink the market.

B. If the government places a $2 tax in the market, the seller bears $2 of the tax burden.

C. Buyers and sellers rarely share the burden of a tax equally.

D. When a tax of $1.00 per gallon is imposed on sellers of gasoline, the supply curve for gasoline shifts upward, but by less than $1.00.

E. If the equilibrium wage is $4 per hour and the minimum wage is $5.15 per hour, then a shortage of labor will exist.

1. Assume S(P-)=50+P- D(P+)=370-3P+

Sales tax of 20%

Calculate the equilibrium buyers' and sellers' price with no sale tax, and then with the 20% tax assumed above.

2. Assume S(P-)=50+3P- D(P+)=370-P+

Sales tax of 20%

Calculate the equilibrium buyers' and sellers' price with no sale tax, and then with the 20% tax assumed above.

3. Explain how you answer for question 1 and 2 illustrate the principle that the less responsive side of the market (with a smaller price coefficient) will pay more than half the total cost of a sales tax.

4. Draw diagrams of question 1 and 2 and explain how they illustrate your answer to question 3.
[Hint: Be careful about drawing the relative slopes of the supply and demand functions.]

5. Suppose the government sets a controlled price below the market clearing price for a commodity. Draw a diagram and use the idea of a maximum buying price to explain whether the total price paid by the buyers will end up lower or higher than before.

Could someone help me with number 3,4, and 5? Please and thank you!!