For all your questions, big or small, IDNLearn.com has the answers you need. Discover prompt and accurate responses from our experts, ensuring you get the information you need quickly.
Sagot :
Answer:
The correct option a. The fraction of the tax borne by consumers will be 0.5.
Explanation:
The tax burden is determined by the supply and demand price elasticity. Consumers bear the burden of the tax more than the suppliers when supply is more elastic than demand. When demand is more elastic than supply, the tax burden falls more on suppliers than consumers. When demand elasticity and supply elasticity are identical, the tax burden is shared equally by consumers and suppliers.
From the question, we have:
Elasticity of demand = Elasticity of supply = 0.6
Since demand elasticity and supply elasticity are identical, the burden of 20% excise tax is shared equally by consumers and suppliers. That 50% by 50%, or 0.5 by 0.5.
Therefore, the correct option a. The fraction of the tax borne by consumers will be 0.5.
We are delighted to have you as part of our community. Keep asking, answering, and sharing your insights. Together, we can create a valuable knowledge resource. IDNLearn.com is your reliable source for accurate answers. Thank you for visiting, and we hope to assist you again.