Answer to Question #194137 in Macroeconomics for Mohammad daoud

Question

Suppose the federal government requires beer drinkers to pay a $2 tax on each case of beer purchased. (In fact, both the federal and state governments impose
beer taxes of some sort.)
a. Draw a supply-and-demand diagram of the market for beer without the tax. Show
the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers?

Answer 1

a)

The graph mentioned below shows the market for beer without tax. The horizontal axis shows the quantity of beer and the vertical axis shows the price of beer. The intersection of demand (D) and supply (S) curve at point ‘E’ determines the equilibrium units of beer produced before tax Q* and equilibrium price before tax P*. 

From the Drawn graph we can conclude that There is no difference between the prices and the price paid by the consumers of beer is equal to the price received by a producer of beer.

The Quantity sold of the beer would be Q*

The graph mentioned below shows the market for beer after Imposing the TAX. The demand curve shifts leftwards from D to D' as the tax is a levy on consumers. The intersection of demand (D’) and supply (S) curve at point E’ determines the equilibrium quantity of beer after-tax Q’.

Here The price received by the producer is Pp and the price paid by the consumer is Pc. The price received of the producer is set where the D’ intersects the S at point E’ and the price paid by the consumer is set at the old demand curve to correspond to the new equilibrium quantity.