What is the effect of the tax on the supply equation

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Reference no: EM131402250

Repeat question 6 assuming the tax is placed on the buyers of milk. Does it matter who pays the tax?

Question 6

Suppose the U.S. government imposes a $1 per gallon of milk tax on dairy farmers. Using the demand and supply equations from question 1:

a. What is the effect of the tax on the supply equation? The demand equation?

b. What are the new equilibrium price and quantity?

c. How much do dairy farmers receive per gallon of milk after the tax? How much do demanders pay?

Reference no: EM131402250

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