(Figure: Market) In the market shown, the original equilibrium price is 60 cents. A tax is then implemented on the buyer. The economic burden of this tax on the buyer is _____ cents.

Question

Quizplus · Accepted Answer

When a tax is implemented on the buyer, the demand curve shifts downwards. The new equilibrium price after the tax is implemented is P1. The economic burden of the tax on the buyer is the difference between the original equilibrium price and the new equilibrium price (P1-P0).

In this case, the new equilibrium price (with tax) is 64 cents. Therefore, the economic burden of the tax on the buyer is 4 cents (64-60=4). So, the correct answer is choice C.

(Figure: Market) in the Market Shown, the Original Equilibrium Price