Suppose buyers of tequila are required to send $1.00 to the government for every bottle of tequila they buy.Further,suppose this tax causes the effective price received by sellers of tequila to fall by $0.80 per bottle.Which of the following statements is correct?

Question

Quizplus · Accepted Answer

The tax causes the demand curve to shift downward by $1.00 at each quantity of tequila, as buyers are now paying $1.00 more per bottle. The price paid by buyers is $0.20 per bottle more than it was before the tax, as the tax causes the effective price received by sellers to fall by $0.80 per bottle. Eighty percent of the burden of the tax falls on sellers, as they receive $0.80 less per bottle after the tax is imposed.

Suppose Buyers of Tequila Are Required to Send $1