Suppose buyers of liquor are required to send $1.00 to the government for every bottle of liquor they buy.Further,suppose this tax causes the effective price received by sellers of liquor 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 liquor because buyers now have to pay $1.00 more for each bottle. The price paid by buyers is $0.20 per bottle more than it was before the tax because 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 because they receive $0.80 less for each bottle of liquor they sell.

Suppose Buyers of Liquor Are Required to Send $1