Determine the new price and quantity and the division of tax

Reference no: EM131205628

Tax incidence can be measured with shadow supply curves instead of shadow demand curves. When a tax is imposed, it can be visualized with a shadow supply curve S T, which lies above and to the left of the original supply curve. Using that information, analyze both a specific tax on gasoline and an ad valorem tax on gasoline and determine the new price and quantity and the division of the tax burden between buyer and seller. Do you think your conclusions would be any different if you used a shadow demand curve instead of a shadow supply curve? Why or why not?

Reference no: EM131205628

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