Figure 6-24
Suppose the government imposes a $2 on this market.

-Refer to Figure 6-24.Suppose D1 represents the demand curve for paperback novels,D2 represents the demand curve for gasoline,and S1 represents the supply curve for paperback novels and gasoline.After the imposition of the $2 on paperback novels and on gasoline,the

Question

Figure 6-24
Suppose the government imposes a $2 on this market.
 
-Refer to Figure 6-24.Suppose D1 represents the demand curve for paperback novels,D2 represents the demand curve for gasoline,and S1 represents the supply curve for paperback novels and gasoline.After the imposition of the $2 on paperback novels and on gasoline,the

Quizplus · Accepted Answer

After the imposition of the $2 tax, the demand curve for both goods shifts downward by $2. Since the two demand curves have different elasticities, the burden of the tax will not be equally shared between buyers and sellers of the two goods. Gasoline has a more inelastic demand than paperback novels, so buyers of gasoline will bear a higher burden of the tax than buyers of paperback novels. Sellers of both goods will bear an equal burden of the tax since the supply curves are the same for both goods. Therefore, option A is correct.

Figure 6-24 Suppose the Government Imposes a $2 on This Market