Answer to Question #131035 in Microeconomics for tooba

Question

Q.12288 Assume supply curve is perfectly elastic and demand is linear and downward sloping.

a) What is the effect of a specific tax collected from producers on equilibrium price and quantity?

Answer _____________________________________________________________________

b) Who (Consumer or Producer) will bear the whole burden of tax?

Answer _____________________

Answer 1

a) The equilibrium price will not change, and the equilibrium quantity will decrease.

b) Producer will bear the whole burden of tax.