Effect of a tax on buyers and sellers
The following graph shows the daily market for jeans when the tax on sellers is set at $0 per pair.
Suppose the government institutes a tax of $5.80 per pair, to be paid by the seller. (Hint: To see the impact of the tax, enter the value of the tax in the Tax on Sellers field and move the green line to the after-tax equilibrium by adjusting the value in the Quantity field. Then enter zero in the Tax on Sellers field. You should see a tax wedge between the price buyers pay and the price sellers receive.)
Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.
Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.
Buyers Elasticity:0.46,2.18,0.92,2.56
Sellers Elasticity:0.39, 1.28, 2.56, 0.46
last drop down: less, more