Without any taxes, suppose the equilibrium price is $4 and the equilibrium quantity is 10
units. The government then imposes a $2 per unit tax on the consumers. The resulting
equilibrium price is $5 and the equilibrium quantity is 8 units. What is the value of the revenue burden?
The tax burden can be determined by calculating the difference between the price consumers pay after the tax is imposed and the price they paid before the tax. In this case, consumers pay $5 per unit after the tax is imposed, compared to the equilibrium price of $4 per unit before the tax. Therefore, the tax burden per unit is $5 - $4 = $1.
To find the total revenue burden, we multiply the tax burden per unit by the quantity of units. In this case, the equilibrium quantity after the tax is 8 units. Thus, the total revenue burden is $1 * 8 = $8.
To find the value of the revenue burden, we need to calculate the difference between the price paid by consumers before and after the tax is imposed.
Before the tax:
The equilibrium price without tax is $4, and the equilibrium quantity is 10 units. This means consumers were paying $4 per unit.
After the tax:
The equilibrium price after the tax is $5, and the equilibrium quantity is 8 units. This means consumers are now paying $5 per unit, including the $2 tax imposed by the government.
To determine the value of the revenue burden, we need to subtract the price paid by consumers before the tax from the price paid after the tax:
$5 per unit - $4 per unit = $1
Therefore, the value of the revenue burden is $1 per unit.
To find the value of the revenue burden, we need to understand the effects of the tax on the equilibrium price and quantity.
Before the tax is imposed, the equilibrium price is $4 and the equilibrium quantity is 10 units. This means that at a price of $4, buyers are willing to purchase exactly 10 units, and suppliers are willing to supply exactly 10 units. This is known as the market equilibrium.
When the government imposes a $2 per unit tax on consumers, the tax adds an additional cost to each unit purchased. As a result, the demand curve shifts downwards by $2, leading to a new equilibrium price and quantity.
The new equilibrium price is $5, which is $1 higher than the pre-tax equilibrium price. The equilibrium quantity reduces to 8 units, which means there is a decrease in the quantity bought and sold due to the tax.
To find the value of the revenue burden, we need to calculate the difference between the price paid by consumers and the price received by producers for each unit. In this case, the price paid by consumers (including the tax) is $5, and the price received by producers is $4.
Since the tax is $2 per unit, the revenue burden per unit is the difference between the price paid by consumers and the price received by producers, which is $5 - $4 = $1.
To find the total revenue burden, we multiply the revenue burden per unit by the new equilibrium quantity. In this case, the revenue burden would be $1 * 8 units = $8.
Therefore, the value of the revenue burden in this scenario is $8.