question archive The government decides to impose a per unit tax on the sale of beer levied on the buyers of beer
The government decides to impose a per unit tax on the sale of beer levied on the buyers of beer
Subject:EconomicsPrice:2.88 Bought3
The government decides to impose a per unit tax on the sale of beer levied on the buyers of beer. If the market for beer is perfectly competitive then _____.
a. if the price elasticity of demand for beer is -2.7 and the price elasticity of supply is +1.4, the effective burden of the tax will be greater on the buyer than on the seller
b. if the price elasticity of demand for beer is -0.7 and the price elasticity of supply is +0.4, the effective burden of the tax will be greater on the seller than on the buyer
c. if the price elasticity of demand for beer is -0.3 and the price elasticity of supply is +0.9 the effective burden of the tax will be greater on the seller than on the buyer
d. if the price elasticity of demand for beer is -1.9 and the price elasticity of supply is +2.4, the effective burden of the tax will be greater on the seller than on the buyer
e. if the price elasticity of demand for beer is -2.5 and the price elasticity of supply is +1.6, the effective burden of the tax will be greater on the buyer than on the seller
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_Option b, if the price elasticity of demand for beer is -0.7 and the price elasticity of supply is +0.4, the effective burden of the tax will be greater on the seller than on the buyer.
This is because notice that the elasticity of demand is greater than the elasticity of supply (0.7>0.4), and when this is the case, the producers or the sellers have to bear more burden than what consumers have to bear.
