At Fenway Park, home of the Boston Red Sox, seating is limited to about 38,000 Hence, the number of
Summary
TLDRThe script discusses the impact of a tax on ticket sales, emphasizing that the tax is levied on buyers, not sellers. With a fixed supply of 38,000 tickets, the supply curve is perfectly inelastic. The tax shifts the demand curve leftward, reducing the equilibrium price from P to P1. The burden of the tax is entirely absorbed by the seller (Red Sox), as they cannot adjust supply, resulting in lower ticket prices. Buyers continue to pay the same price, indicating no burden shift to them.
Takeaways
- 💼 The tax is levied on the buyer, not the seller, which influences the demand side of the market.
- 🎟️ The number of tickets is fixed at 38,000, making the supply perfectly inelastic.
- 📉 The supply curve is a vertical line at 38,000 tickets, indicating no change in quantity supplied with price changes.
- 📊 The demand curve is downward sloping, showing the typical relationship between price and quantity demanded.
- 📉 The imposition of the tax causes the demand curve to shift leftwards, indicating reduced demand at each price level.
- 💸 The new equilibrium price after the tax (P1) is lower than the original equilibrium price (P).
- 💵 The difference between the original price (P) and the new price (P1) is $5, representing the tax amount.
- 💸 The buyer's burden from the tax is zero, as they continue to pay the same price (P) after the tax is levied.
- 🏭 The seller (Red Sox) bears the full burden of the tax, amounting to $5, due to the inability to adjust the supply.
- 📉 The seller absorbs the entire tax by lowering ticket prices, resulting in a lower equilibrium price (P1).
Q & A
Who bears the tax burden according to the transcript?
-According to the transcript, the tax burden is borne entirely by the seller, represented by the Red Sox in this scenario, since they cannot alter the supply of tickets which is fixed at 38,000.
Why is the supply curve described as perfectly inelastic?
-The supply curve is described as perfectly inelastic because the number of tickets is fixed at 38,000, meaning that the quantity supplied does not change with price changes.
How does the tax affect the demand curve?
-The tax affects the demand curve by causing it to shift leftwards, indicating that at any given price, there will be a lower quantity demanded due to the increased cost to the buyer.
What is the original equilibrium price before the tax is implemented?
-The original equilibrium price before the tax is implemented is denoted as 'P' in the transcript.
What is the new equilibrium price after the tax is implemented?
-The new equilibrium price after the tax is implemented is denoted as 'P1', which is lower than the original equilibrium price 'P'.
How much does the tax affect the price?
-The tax results in a price difference of $5 between the original equilibrium price 'P' and the new equilibrium price 'P1'.
Why does the buyer not bear any tax burden according to the transcript?
-The buyer does not bear any tax burden because they continue to pay the same price 'P' after the tax is levied, as the seller absorbs the entire tax through lower ticket prices.
What is the implication of the tax being levied on the buyer?
-The implication of the tax being levied on the buyer is that it affects the demand side of the market, causing the demand curve to shift leftwards and leading to a new equilibrium at a lower price.
Why is the supply curve represented as a vertical line?
-The supply curve is represented as a vertical line because it is perfectly inelastic, indicating that the quantity supplied does not change regardless of the price.
What is the significance of the fixed number of tickets at 38,000?
-The significance of the fixed number of tickets at 38,000 is that it sets a limit on the supply, making the supply curve perfectly inelastic and affecting how the tax impacts the market.
How does the tax impact the seller's revenue?
-The tax impacts the seller's revenue by reducing the equilibrium price from 'P' to 'P1', meaning the seller absorbs the tax through lower ticket prices, effectively reducing their revenue.
Outlines
💼 Impact of Tax on Buyers and Sellers
This paragraph discusses the implications of a tax levied on buyers rather than sellers in a market scenario with a fixed supply of tickets. The speaker explains that the tax affects the demand curve, causing it to shift leftwards and resulting in a lower equilibrium price. The burden of the tax is entirely absorbed by the seller, represented by the Red Sox in this context, as they cannot adjust the fixed supply of 38,000 tickets. Consequently, the seller experiences a decrease in ticket prices, while buyers continue to pay the same price as before the tax was implemented.
Mindmap
Keywords
💡tax
💡buyer
💡seller
💡tickets
💡fixed
💡perfectly inelastic
💡supply curve
💡demand curve
💡equilibrium price
💡tax burden
💡Red Sox
Highlights
Tax is levied on the buyer, not the seller.
Number of tickets is fixed at 38,000.
Supply curve is perfectly inelastic, represented as a vertical line.
Tax affects the demand curve, not the supply curve.
Demand curve shifts leftwards due to the tax, indicating lower demand at higher prices.
Original equilibrium price is denoted as P.
New equilibrium price after tax is P1, which is lower than P.
Difference between P and P1 equals $5, representing the tax burden.
Buyer's tax burden is zero.
Seller (Red Sox) bears the full $5 tax burden.
Supply of tickets remains fixed at 38,000 despite price changes.
Seller absorbs the entire tax through lower ticket prices.
Consumers continue to pay the same price as before the tax (P).
Supply curve's inelasticity prevents sellers from adjusting ticket prices.
Graphical representation of the supply and demand with tax impact.
Tax burden is entirely absorbed by the seller due to fixed supply.
Transcripts
so for this question there are two
important things that we must take into
account the first thing is that the tax
is leved on the buyer and not the seller
and this will have implications the
second thing that is of importance is
the fact that we know that the number of
tickets are fixed at 38,000 as the
question clearly mentions that the
number of seats are fixed and Limited at
38,000 this well this also has implic
ations the implication of this is that
the supply curve is fixed it's a
vertical line it's what's known as
perfectly
inelastic now because the tax is leved
on the buyer and not the seller the
implication of this is that the demand
curve will be affected not the supply
curve so we can represent this with our
usual demand and Supply
schedule where on the Y AIS we have the
price of the tickets and on the x- axis
we have the quantity of tickets
so as I said the supply curve is
perfectly inelastic which means it's a
vertical line that is fixed at 38,000 as
specified by the
question so we can draw that like
this and that's fixed at 38,000 and
that's our supply curve the demand curve
is regular and downward
sloping so at this point of intersection
we have the original equilibrium Price p
before the tax was was
implemented now as I said the tax is
affecting the buyer so the demand curve
will be affected with a higher price
there going to be lower demand so the
demand curve is going to shift leftwards
so this shifts to
D1 and as you can see the equilibrium
price is now lower
P1 now this difference between p and P1
is equal to $5
now with regards to who takes the burden
of the tax on the burden of the tax for
the buyer is exactly zero doar and the
burden of the tax for the seller which
is the Red Sox in this particular
instance is the full
$5 the reason for this is is that the
Red Sox are unable to alter the supply
of tickets as it's clearly mentioned
that the supply is fixed at 38,000 so
even if the price changes Supply stays
fixed the therefore they will end up
absorbing the entire tax via lower
ticket prices as we can see in my
diagram there's a lower equilibrium
price from P to P1 and this is how yeah
the lower prices this is how the
supplier or the seller sorry in this
case is absorbing the entire tax via
these lower ticket prices the consumers
are paying the same price as before
they're still paying P after the tax is
leved so their burden is z do
what
Weitere ähnliche Videos ansehen
5.0 / 5 (0 votes)