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Consider the marginal buyer in a market, the individual who is first to exit the market if the price of the good increases an
Suppose a policymaker wants to impose a tax on a luxury good with the intention that buyers will bear the burden (or incidenc
One concept we unfortunately wont get to cover is progressive, regressive, and flat (or proportional) taxes. In short the de
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Answer #1

1.

In the given scenario, the consumer surplus of the marginal buyer will be zero. It is zero, because marginal buyer's maximum willingness to pay is the equilibrium price. Once the equilibrium price increases and it becomes higher than the maximum willingness to pay of the marginal buyer, then marginal buyer exits the market. So, marginal buyer will have zero consumer surplus.

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2.

In the given scenario, where producers have inelastic supply and buyers have elastic demand, then producers will bear the greater amount of tax burden due to inelastic supply and buyers will have lower amount of tax burden. It will make government to collect the tax revenue, but it will also harm the producers. Besides, the deadweight loss will also be bigger due to inelastic supply curve. So, government will not achieve the objective of collecting tax revenue and not harming the producers.

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