a. If the price elasticity of demand is equal to 2, the price elasticity of supply is equal to 3, and government imposes a $10 tax on this market, what fraction of this $10 tax will be paid by the buyers? What fraction of this tax will be paid by the sellers?
b. If the price elasticity of demand is equal to 4, the price elasticity of supply is equal to 2, and government imposes a $3 tax on this market, what fraction of this $3 tax will be paid by the buyers? What fraction of this tax will be paid by the sellers?
c. Suppose government wants to impose a $2 tax on the labor market. Will the market outcomes be any different if (a) the entire $2 tax was imposed on workers, (b) the entire $2 tax was imposed on employers, (c) $1 tax is imposed on workers and $1 tax is imposed on employers? Why or why not?
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