Figure 6-11
-Refer to Figure 6-11.Sellers pay how much of the tax per unit?

Question

Figure 6-11 
-Refer to Figure 6-11.Sellers pay how much of the tax per unit?

Quizplus · Accepted Answer

In this diagram, the supply curve intersects the demand curve at a price of $10. Before the tax, sellers would receive $10 per unit. With a per unit tax of $2.00, the new total cost to sellers is $8.00 (their original $6.00 cost + $2.00 tax). The new equilibrium price is $12.00 which means buyers are willing to pay an extra $2.00 per unit. If sellers were to bear the entire tax burden, they would only receive $8.00 per unit after the tax, which is less than their original $10.00.  Therefore, sellers would pass on part of the tax to buyers by raising the price from $10.00 to $11.50, and pay only $1.50 of the $2.00 tax themselves.

Figure 6-11 -Refer to Figure 6-11.Sellers Pay How Much of the Tax