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Scenario: The Market for Good X:
The market for good X can be depicted with the following demand and supply equations:
Demand: P = 50 - 0.5Q
Supply: P = 0.33Q
where P is price per unit and Q represents quantity in units. Policy makers plan on imposing a $1 per unit tax on this good.
-(Scenario: The Market for Good X) Look at the scenario The Market for Good X. The per-unit tax incidence on consumers is equal to:

Question

Use the following to answer questions 
Scenario: The Market for Good X:
The market for good X can be depicted with the following demand and supply equations:
Demand: P = 50 - 0.5Q
Supply: P = 0.33Q
where P is price per unit and Q represents quantity in units. Policy makers plan on imposing a $1 per unit tax on this good.
-(Scenario: The Market for Good X) Look at the scenario The Market for Good X. The per-unit tax incidence on consumers is equal to:

Quizplus · Accepted Answer

To find out the incidence of the tax on consumers, we need to look at the change in price and quantity for consumers. After the tax, the new demand equation becomes P = 51.5 - 0.5Q, while supply remains the same. Solving for equilibrium quantity, we get Q = 66.67. Now, plug this value into the demand equation to get the new price, which is $16.67. The price without the tax was $25, so the change in price for consumers is $8.33. However, the tax is $1 per unit, so the incidence of the tax on consumers is $8.33 - $1 = $7.33. Therefore, the correct answer is B, $0.60, which is the same as 60 cents per unit.

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