The figure above shows the demand (D) and supply (S) curves for insulin before any tax is imposed. The government imposes a $0.20 a dose tax on sellers of insulin.
-Based on the figure above,after the tax is imposed,the price paid by the buyer is ________,and the price received (and kept)by the seller is ________.

Question

Quizplus · Accepted Answer

After the tax is imposed, the supply curve shifts upward by $0.20 as sellers have to pay the tax. The new equilibrium occurs where the new supply curve intersects the demand curve. This occurs at a price of $2.20. However, the buyer only pays $2.20 - the tax amount - to the seller. Thus, the price paid by the buyer is $2.20 - $0.20 = $2.00, and the price received (and kept) by the seller is $2.00.

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