Use the following graph of the market for Washington apples

Use the following graph of the market for Washington apples to label each item below The first item is labeled for illustration (please mark the rest on the attached answer sheet): the price paid by buyers after the tax the price actually received by sellers after the tax producers\' surplus after the tax, consumers\' surplus after the tax, the deadweight loss due to the tax, and the total tax revenue collected by the government Which Is more elastic to the price of apples in this market - supply or demand? If an $0.80 per pound tax is levied on the sale/purchase of apples, would its incidence fall more on the surplus of buyers or sellers of apples?

Solution

(24)

F - price actually received by sellers after tax

E - Producer surplus after tax (area between supply curve and price)

D - Consumer surplus after tax (area bweetn demand curve and price)

C - Deadweight loss due to tax

B - tax revenue

(25)

Supply curve is flatter than the demand curve, so supply is more elastic.

(26)

Since demand is more inelastic than the supply, a unit tax will have most of the tax incidence borne by the buyers.