Keep the Highest 3 Attempts 7 Effect of a tax on buyers and

Keep the Highest: 3 Attempts: 7. Effect of a tax on buyers and sellers The following graph shows the daily market for wine. Suppose the government institutes a tax of $11.60 per bottle. This places a wedge between the price buyers pay and the price sellers receive 50 Supply 9 35 - 30 1 e 20 ?: 15 0 10 20 3040 60 100 QUANTITY (Bottles of wine)

Solution

The burden of the rax falls heavily on the less elastic side of the market.

	Q	paid by buyers	received by sellers
before tax	50	25	25
after tax	40	35	23.40