Temple College
ECON 2302
NAME:_______________________
Assignment #7
[Use the back of this page to complete any of your responses.]

Examine the graph below.
Supplytax
P
$16
12
10
C
B
Supply
D
A
40
Demand
60
Q

If the government imposes an excise tax as shown, who bears the statutory incidence?
Explain.

Who bears the economic incidence? Explain.

What is the total amount of the tax paid by consumers? Show your calculations. Draw
diagonal lines in the geometric area of the graph that represents the part of the tax paid by
consumers.

What is the total amount of the tax paid by suppliers? Show your calculations. Draw
opposite-slanting diagonal lines in the geometric area of the graph that represents the part of
the tax paid by suppliers.

What is the amount of the tax per unit? Show your calculations.

What is the total revenue generated (to government) by the tax? Show your calculations.
Lightly shade the geometric area of the graph that represents the government’s tax revenue.

What is the excess burden or efficiency loss resulting from the tax? Show your calculations.
Shade (more darkly) the excess burden of the tax.

Calculate the price elasticity of demand between the equilibrium price and the new price paid
by consumers as a result of the imposition of the tax. Briefly explain the connection between
the price elasticity of demand you calculated and the economic incidence of the tax.