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View Full Version : What happens if imposing excise tax and sales tax


dkim
Sep 14, 2014, 07:55 PM
If there is 30 cents excise tax and 30 cents sales tax on supply and demand curve,

What would happen to the price?

ArcSine
Sep 15, 2014, 09:35 AM
Just to get you aimed right and started towards first base:

If p is the unit price at the register (in dollars, presumably), note that in the post-tax scenario, (p + 0.3) is the effective price paid by the purchaser and (p - 0.3) is the effective unit revenue to the producer.

Pop those parenthetical amounts into your demand (as function of price) and supply (as f(price)) equations, respectively, for the variable p, then see where that leads in terms of a revised equilibrium unit price and quantity.

I'll let you take over and finish rounding the bases.