Analyzing Taxes and Welfare

| December 24, 2015

Buyer Buyer Value Seller Seller Cost

1 $16.00 1 $4.00
2 $15.50 2 $4.50
3 $15.00 3 $5.00
4 $14.00 4 $6.00
5 $13.50 5 $6.50
6 $13.00 6 $7.00
7 $12.50 7 $7.50
8 $12.00 8 $8.00
9 $11.00 9 $9.00
10 $10.50 10 $9.50
11 $10.00 11 $10.00
12 $9.50 12 $10.50
1.1. If the price is $10, how many buyers will be willing to buy? That is, how many buyers have a buyer value that is greater

than or equal to the $14 cost of a textbook–$10 to the seller and $4 in tax? (As always, unless stated otherwise, we are following the

convention that traders who are indifferent about trading at a price go ahead and trade, so someone with a buyer value equal to $14 will

buy.)

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