DSE 2009 Question 12: Taxation: incidence and efficiency
The demand function for lemonade is Qd=100−p, and the supply function is Qs=10+2p, where p is the price in rupees. The government levies a sales tax on lemonade after which the volume of sales drops to 60. Then the per unit tax on lemonade is
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The demand function for lemonade is Q_d=100-p, and the supply function is Qₛ=10+2p, where p is the price in rupees. The government levies a sales tax on lemonade after which the volume of sales drops to 60. Then the per unit tax on lemonade is (A) Rs. 20 (B) Rs. 15 (C) Rs. 10 (D) Rs. 5
Also written as: The demand function for lemonade is Q_d=100-p, and the supply function is Q_s=10+2p, where p is the price in rupees. The government levies a sales tax on lemonade after which the volume of sales drops to 60. Then the per unit tax on lemonade is
Taxation: incidence and efficiency has come up 79 times in 7 exams since 2009.
What this question tests
This question is on Tax incidence, part of Taxation: incidence and efficiency in Public Economics.
Who actually bears a tax, whoever the law makes pay.
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