Author Question: Consider an excise tax imposed on daily parking charges in the downtown of a small city. Before the ... (Read 51 times)

ega16 · **on:** Oct 12, 2022

Consider an excise tax imposed on daily parking charges in the downtown of a small city. Before the imposition of the tax, equilibrium price and quantity are $15 and 100 cars parked. (P = $15, Q = 100). The city government imposes a tax of $3 per car parked per day. Market equilibrium adjusts to P = $18 and Q = 100. Which of the following statements about the burden of the tax is correct?
◦ Price elasticity of supply is 0 and therefore the entire burden of the tax falls on the consumer.
◦ Elasticity of demand is 0 and therefore the entire burden of the tax falls on the consumer.
◦ Elasticity of supply is 1 and therefore the entire burden of the tax falls on the seller.
◦ The burden of the tax is shared equally by the seller and the consumer.
◦ Price elasticity of demand is 1 and therefore the entire burden of the tax falls on the seller

Kevin5! · **Reply #1 on:** Oct 12, 2022

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