The following graph represents supply and demand in the market for tanning sessions. Suppose that a $15 excise tax has been placed on tanning salon providers. a. Using the graph below, show the effect of this tax on tanning salon providers. Instructions: Use the tool provided 'New line' to draw either a new supply or demand curve that reflects the impact of this tax. Then use the tool provided 'New EQ' to indicate the new equilibrium point. $50 Tools $45 $40 New line New EQ Supply $35 $30 $25 $20 $15 $10 $5 Demand 10 20 30 40 50 60 70 80 90 100 Quantity (number of tanning sessions) Price (per tanning session) b. Who pays more of the tax incidence? Consumers, because the price elasticity of supply is less than the price elasticity of demand. Consumers, because the price elasticity of supply exceeds the price elasticity of demand. Consumers and producers split the tax. Producers, because the price elasticity of supply exceeds the price elasticity of demand.

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