Use the following information to answer the following questions.
The following graph depicts a market where a tax has been imposed.P e was the equilibrium price before the tax was imposed,and Q e was the equilibrium quantity.After the tax,P C is the price that consumers pay,and P S is the price that producers receive.Q T units are sold after the tax is imposed.NOTE: The areas B and C are rectangles that are divided by the supply curve S T .Include both sections of those rectangles when choosing your answers.

-Which party is responsible for paying this tax out of pocket?

Question

Use the following information to answer the following questions.
The following graph depicts a market where a tax has been imposed.P e was the equilibrium price before the tax was imposed,and Q e was the equilibrium quantity.After the tax,P C is the price that consumers pay,and P S is the price that producers receive.Q T units are sold after the tax is imposed.NOTE: The areas B and C are rectangles that are divided by the supply curve S T .Include both sections of those rectangles when choosing your answers.
 
-Which party is responsible for paying this tax out of pocket?

Quizplus · Accepted Answer

Producers are responsible for paying the tax out of pocket as they receive a lower price (P_S) than the price paid by consumers (P_C). Answer: D The tax burden is shared by both consumers and producers, but not all consumers and producers bear the same burden. Some consumers pay the higher price (P_C) while some producers receive the lower price (P_S). The extent to which each group bears the burden depends on the elasticity of demand and supply.

Use the Following Information to Answer the Following Questions