You know that if a tax is imposed on a particular product, the burden of the tax

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You know that if a tax is imposed on a particular product, the burden of the tax is shared by producers and consumers. You also know that the demand for automobiles is characterized by a stock adjustment process. Suppose a special 20% sales tax is suddenly imposed on automobiles. Will the share of the tax paid by consumers rise, fall, or stay the same over time? Explain briefly. Repeat for a 50-cents-per-gallon gasoline tax.
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Microeconomics

ISBN: 978-0132857123

8th edition

Authors: Robert Pindyck, Daniel Rubinfeld

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