STSTEER

Irrelevance of Tax Incidence

Recognising that a per-unit tax has the same effect on prices and quantity whether sellers or buyers are legally required to pay it.

Question template

Part 1

You are an analyst studying the market for firewood in a mountain county. The quantity demanded per month is Q_d = demand and the quantity supplied per month is Q_s = supply, where P is the price in dollars per cord and Q is the number of cords. The market is competitive. The government introduces a tax of $tax per cord, which sellers must pay to the government for every cord they sell. Once the market adjusts to the tax, how much do sellers keep per cord, after any tax they pay to the government themselves? Give the amount to the nearest cent.

Part 2

You are an analyst studying the market for firewood in a mountain county. The quantity demanded per month is Q_d = demand and the quantity supplied per month is Q_s = supply, where P is the price in dollars per cord and Q is the number of cords. The market is competitive. The government introduces a tax of $tax per cord, which buyers must pay to the government for every cord they buy. Once the market adjusts to the tax, how much do sellers keep per cord, after any tax they pay to the government themselves? Give the amount to the nearest cent.

Use it

from datasets import load_dataset
ds = load_dataset("narunraman/steer_me", "tax_incidence")