How much tax revenue does the government collect

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Reference no: EM13153163

Suppose that, as of March 31, 2013, the market price of a gallon of milk is $3.50 and that 100,000 gallons are purchased per week. On April 1, the government imposes a tax of $1.00 per gallon. The price (including tax) that consumers then pay is $3.80 per gallon and the quantity purchased per week falls to 90,000 gallons.

a. What is the elasticity of demand in that range of the demand curve?

b. What is the price (net of tax) that stores receive?

c. What is the elasticity of supply in that range of the supply curve?

d. How much tax revenue does the government collect?

Reference no: EM13153163

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