5. Calculating tax incidence Suppose that the U. S. government decides to charge wine consumers a tax. Before the tax, 45 billion bottles of wine were sold every year at a price of $4 per bottle. After the tax, 38 billion bottles of wine are sold every year; consumers pay $5 per bottle (including the tax), and producers receive $2 per bottle. The amount of the tax on a bottle of wine is $ per bottle. Of this amount, the burden that falls on consumers is $ per bottle, and the burden that falls on producers is $ per bottle. True or False: The effect of the tax on the quantity sold would have been the same as if the tax has been levied on producers. True False

The amount of the tax on a bottle of wine is $3 per bottle;

Amount of tax = Amount paid by consumers - Amount received by producers

= 5 - 2

=$3

Of this amount, the burden that falls on consumers is $1 per bottle;

Burden on consumer = Price paid by Consumer after tax - Price paid before

= 5 - 4

= $1

The burden that falls on producers is $2 per bottle;

Burden on producers = Tax - Consumer burden

= 3 - 1

= $2

The effect of the tax on the quantity sold would have been the same as if the tax has been levied on producers. FALSE

If the tax had been on producers then the price might not have increased as it did. This would leave the price at or close to the point it was at and consumers would still be able to afford more of the bottles.

being born in poverty would limit the people's chances, opportunities and benefits.

this happen because of several things, such as:

- poor people tend to gain less access to good education and nutrition. this mean that their chance to obtain high paying jobs would also be limited.

- poor people tend to socialize with other poor people while the rich tend to socialize with other rich people. this means that simply throguh their social circle, rich people would have more business opportunities compared to the poor people.

- rich people tend to have more capital in their disposal. this would benefit them in business since it is far easier for them to fund their business operation compared to poor people.