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 sellers receive after the imposition of a tax of $3 is $2,the incidence of the taxation on sellers 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 sellers receive after the imposition of a tax of $3 is $2,the incidence of the taxation on sellers is approximately ________.

Quizplus · Accepted Answer

The difference between the pre-tax equilibrium price ($3) and the post-tax price that sellers receive ($2) is equal to the amount of the tax ($3). Therefore, sellers are receiving $1 less per unit of the good sold. 
The percentage change in price for sellers is:
($1 price decrease / $3 pre-tax equilibrium price) x 100% = 33.33%
Therefore, the incidence of the taxation on sellers is approximately 33%, which is option C.

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