The demand and the supply for a good are each neither perfectly elastic nor perfectly inelastic....

The demand and the supply for a good are each neither perfectly elastic nor perfectly inelastic. Imposing an excise tax on the good is:

a, paid by only seller

b, paid by only buyer

c, paid by best buyer and seller

d, paid by neither buyer or seller.

Which of the following statements about a competitive market is INCORRECT?

a, a price floor is aimed at helping consumer

b, price ceiling increase quantity demand

c, Consumer surplus increase when price decrease

d, a price floor increase quantity supplied

Expert Solution

Ans 1)

When price elasticity of demand is perfectly inelastic then tax burden in all sense is over buyer whereas if price elasticity of demand is perfectly elastic then tax burden is over seller. Hence when elasticity of demand is not perfectly elastic or inelastic burden is shared by both buyers and sellers

Option C is correct

Ans 2).

In competitive market binding price ceiling is set below Equilibrium market price whereas binding price floor is set above Equilibrium market price therefore price ceiling provided us with excess demand not price floor

Hence option D is correct answer

Rahul Sunny answered 2 years ago

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