4. Explain why economists usually oppose controls on prices.
Economists usually oppose controls on prices because they believe that businesses and consumers should be the ones to drive the supply and demand and not have controls on the prices of goods and services. They believe that businesses and consumers alone would coordinate an economic balance.
5. Suppose the government removes tax on buyers of a good and levies a tax of the same size on the sellers of the good. How does this change in tax policy affect the price that buyers pay sellers for this good, the amount buyers are out of pocket including the tax, the amount sellers receive net of the tax, and the quantity of the good sold.
A tax on the sellers shifts the supply curve up by the size of the current tax. The quality of the product or service falls and the buyers’ price rises. The price that the sellers receive falls so both the buyer and the seller shares the burden of the taxes.
7. What determines how the burden of a tax is divided between buyers and sellers? Why?
Elasticity and tax incidence determines the burden of the tax divided between the buyers and sellers. As it states in chapter six; in panel if the supply curve is elastic and the demand curve is inelastic. In the example given in chapter six the price received by sellers falls only slightly, while the price by buyers rises substantially. With that being said the buyers bear most of the burden of the tax. If the supply curve is inelastic and the demand curve is elastic the price received by sellers falls substantially, while the price paid by buyers rises only slightly. In this case sellers bear most of the burden.