According to the figure, what share of the per unit tax on bags of coffee beans

Question

According to the figure, what share of the per unit tax on bags of coffee beans is paid by the buyers and what share is paid by the sellers?

A. 55% and 45%, respectively

B. 45% and 55%, respectively

C. 50% and 50%, respectively

D. 0% and 100%, respectively

E. 100% and 0%, respectively

A. 55% and 45%, respectively

B. 45% and 55%, respectively

C. 50% and 50%, respectively

D. 0% and 100%, respectively

E. 100% and 0%, respectively

Supply tax Price Supply $48 $39 $28 Demand 1,444 2,525 3,755 Quantity (per 50 1b. bag)

Explanation / Answer

Ans: B. 45% and 55%, respectively

Explanation: Total tax = $20 (48-28 i.e. vertical difference between the two supply curves)

Before tax price = $39 (both buyer & seller)

After tax price for buyer = $ 48 ( increase of $ 9)

Tax share = 9/20 * 100 = 45 %

Sellers pay $ 20 as tax on the received $ 48. So:

Tax share of seller = (20-9)/20*100 = 11/20*100 = 55%

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