1. When a tax is imposed on sellers, how does the supply curve shift? 2. When a tax is imposed on buyers, how does the demand curve shift? 3. Tax incidence refers to: 4. When deman... 1. When a tax is imposed on sellers, how does the supply curve shift? 2. When a tax is imposed on buyers, how does the demand curve shift? 3. Tax incidence refers to: 4. When demand is inelastic and supply is elastic, the tax burden falls more heavily on: 5. If the elasticity of demand is 0.5 and the elasticity of supply is 1.5, who bears the larger share of the tax burden? 6. The slope of the budget constraint represents: 7. Indifference curves represent: 8. At the consumer's optimal choice, the slope of the indifference curve equals: 9. A rise in income causes the budget constraint to: 10. A price decrease for one good while holding income constant causes: 11. The substitution effect of a price change:
Understand the Problem
The questions are assessing knowledge on economic concepts related to supply and demand curves, tax incidence, elasticity, budget constraints, and consumer choice. The high-level approach to solving these questions involves understanding how taxes impact supply and demand and how elasticity affects burden sharing and consumer decisions.
Answer
1. Left, 2. Left, 3. Division of tax burden, 4. Buyers, 5. Buyers, 6. Opportunity cost, 7. Bundles of goods, 8. Slope equals budget slope, 9. Shift outward, 10. Rotate outward, 11. Increases cheaper good
- Left, 2. Left, 3. Division of tax burden, 4. Buyers, 5. Buyers, 6. Opportunity cost, 7. Bundles of goods, 8. Slope of budget constraint, 9. Shift outward parallel, 10. Rotate outward, 11. Increases consumption of cheaper good
Answer for screen readers
- Left, 2. Left, 3. Division of tax burden, 4. Buyers, 5. Buyers, 6. Opportunity cost, 7. Bundles of goods, 8. Slope of budget constraint, 9. Shift outward parallel, 10. Rotate outward, 11. Increases consumption of cheaper good
More Information
The elasticity of demand and supply helps determine who bears the tax burden; less elastic side bears more.
Tips
A common mistake is confusing the direction of the curve shifts. Remember taxes on sellers affect supply, and taxes on buyers affect demand.
Sources
- Elasticity and tax revenue (article) - Khan Academy - khanacademy.org
- Tax Incidence | Microeconomics - Lumen Learning - courses.lumenlearning.com
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