The diagram below shows supply and demand diagrams (S and D) for some product. The government then imposes an excise tax. The new supply curve is ST. FIGURE 18- 4
-Refer to Figure 18- 4. What is the dollar value of the direct burden of this tax?

Question

The diagram below shows supply and demand diagrams (S and D) for some product. The government then imposes an excise tax. The new supply curve is ST.  FIGURE 18- 4
-Refer to Figure 18- 4. What is the dollar value of the direct burden of this tax?

Quizplus · Accepted Answer

The direct burden of the tax is equal to the difference between the new equilibrium price with the tax (P2) and the old equilibrium price without the tax (P1), multiplied by the quantity (Q). In this case, the difference in price is $6 ($24 - $18), and the quantity is 30. Therefore, the direct burden of the tax is $180 (6 x 30).

The Diagram Below Shows Supply and Demand Diagrams (S and D)