price elasticity of demand and indirect taxes

What is an indirect tax?

• It is a tax imposed on goods or services

• It is a tax imposed on government services?

• It is a tax paid by producers

• It is a tax deducted from employees salaries

Answer explanation

An indirect tax is a tax 

-imposed on a good or service

-paid to the government by a producer or supplier, though some of the burden of the tax may be paid by the consumer.

The diagram below is an examples of;

• elastic demand

• inelastic demand

• unitary

• elastic supply

Answer explanation

Since consumers pay a higher burden of the tax, then it is an inelastic demand

In the diagram below, who bears the bigger burden of the tax?

• government

• customers

• producers

• all the above

Answer explanation

Because the PED is inelastic, consumers bears the bigger burden of the tax

Who bears the bigger burden of tax in the figure below

• consumers

• producers

• government

• all the above

Answer explanation

Because demand is elastic

What kind of price elasticity diagram is shown below

• elastic demand

• inelastic demand

• unitary

• infinity

Answer explanation

producers bear a bigger portion of the tax when it is an elastic demand

What was the equilibrium before the tax?

Answer explanation

P*Q*

What is the new equilibrium after the tax?

Answer explanation

PcQt

Supply decreased from ______to _______  after tax

Answer explanation

S1 , S2 (S1+tax)

Producers received _____ before the tax and _______after tax

Answer explanation

P*, Pp(Pc- tax )

Government receives _________

Answer explanation

PC-Pp