9. Taxation - An algebraic approach
Suppose the supply of a good is given by the equationQS=100P−100QS=100P−100, and the demand for the good is given by theequation QD=350−50PQD=350−50P, where quantity (Q) is measured inmillions of units and price (P) is measured in dollars perunit.
The government decides to levy an excise tax of $3.00 per uniton the good, to be paid by the seller.
Calculate the value of each of the following, before the tax andafter the tax, to complete the table that follows:
| 1. | The equilibrium quantity produced |
| 2. | The equilibrium price consumers pay for the good |
| 3. | The price received by sellers |
| Before Tax | After Tax |
|---|
| Equilibrium Quantity (Millions of units) |      |    |
| Equilibrium Price per Unit Paid by Consumers |    |    |
| Price per Unit Received by Sellers |    |    |
Given the information you calculated in the preceding table, thetax incidence on consumers is   per unit of the good, andthe tax incidence on producers is   per unit of thegood.
The government receives   in tax revenue from levyingan excise tax of $3.00 per unit on this good.
True or False: The price ultimately received by the seller (thatis, the amount of money that the seller gets to keep afterreceiving payment from the buyer and paying any applicable taxes)would have been different if the tax had been levied on buyersinstead.
True
False
