Module 1 Problem 2A


Module 1 Problem 2A

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mparsons
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I am having trouble comprehending parts C and D on problem 2A. I am not quite grasping the concept to answer how the price and quantity will change and who will pay the most of the tax in both Jacob's and Rachel's perspectives. Thank you.


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Vorian
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The text does not explain the break down very clearly in the early part of the text.  It's better illustrated later with the explainations of "Consumer Surplus."

The basic idea of determining who pays the tax (consumer or supplier) rests on the prior equilibrium price.  See my earlier email about the calculations.


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