Identify the direct tax burden and excess burden

Reference no: EM131500557

Question: Assume that a country introduces a 25 percent sales tax on the purchase of gasoline. Draw a graph of the effects of the sales tax on the supply and demand for gas. Label the axes and curves, and explain your assumptions about the elasticities of supply and demand that define the slopes of your curves. Identify the direct tax burden, the excess burden, and changes in the market equilibrium price and quantity.

Reference no: EM131500557

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