SPCM 207 Midterm

The government can choose to place the burden of a tax on the buyers in a market by collecting the tax from the buyers rather than the sellers

False, legal incidence to taxe collected from doesnt matter, only elasticty does(the burden of tax its on)

People are suppliers of labor and firms are the consumers so

a tax generally increases the wage firms pay for labor, and decreases the wage people recieve

Which of the following takes place when a tax is placed a good?

an increase in the price buyers pay, a decrease in the price sellers receive, and a decrease in the quantity sold

if d is less elastic(steeper than S)

consumers bear a higher economic incidence

Within the supply and demand model, a tax collected from the buyers of a good shifts the

demand curve downward by the size of the tax per unit.by size of a tax(collected from buyers, not supply but demand)

A tax of €1.00 per litre on petrol

demand is inelastic and supply is elastic(falls more heavily on buyers, whoever is more inelastic

if elasticites are equal

economic incidence will be equal

The burden of tax falls more heavily on on the side of the market that is less elastic

false

When we use the model of supply and demand to analyse a tax collected from the buyers, we shift the demand curve upward by the size of the tax

false, tax on consumers decreases demand, shifts inward or left by size of tax

if S is less elastic(steeper then D)

producers bear a higher econmic incidence

Within the supply and demand model, a tax collected from the sellers of a good shifts the

supply curve upward by the size of the tax per unit(not downward)

When a tax is collected from the buyers in a market,

the tax burden on the buyers and sellers is the same as an equivalent tax collected from the sellers(vertical height of 1.00 between)

Whoever is more inelastic or less elastic pays the higher economic burden of a tax

true

tax in general, increases the price consumers pay and decreases the price producers recieve

true

if medicine is a neccesity, the burden of a tax on medicine will probs fall more heavily on buyers of medicine

true because the curve is more vertical(inelastic) price goes up for consumers

A tax creates a tax wedge between a buyer and a seller. This causes the price paid by the buyer to rise, the price received by the seller to fall, and the quantity sold to fall.

true, consumer + producer surplus, if the curve is inelastic, quantity sold wont fall

A tax collected from buyers has an equivalent impact to a same size tax collected from sellers

true, it doesnt matter who the legal burden is put on the econimc burden only depends on elasticities

Regardless of the legal incidence, the economic incidence

will be dtermined by relative elasticty