The figure below shows the demand (D) and supply (S) curves for Good X before and after a tax is imposed on each unit of the good sold.

-Refer to the figure above.If the pre-tax equilibrium price of Good X was $3 and the price that consumers need to pay after the imposition of a per-unit tax of $3 is $5,the tax incidence on consumers is approximately ________.

Question

The figure below shows the demand (D) and supply (S) curves for Good X before and after a tax is imposed on each unit of the good sold.
 
-Refer to the figure above.If the pre-tax equilibrium price of Good X was $3 and the price that consumers need to pay after the imposition of a per-unit tax of $3 is $5,the tax incidence on consumers is approximately ________.

Quizplus · Accepted Answer

The tax incidence on consumers can be calculated as the difference between the pre-tax equilibrium price and the price that consumers pay after the tax divided by the pre-tax equilibrium price. In this case, the tax incidence on consumers is (5-3)/3 = 2/3, which is approximately 67 percent. Therefore, the correct answer is D.

The Figure Below Shows the Demand (D) and Supply (S)