Question: 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

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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