Final answer:
The joint effect of a $5 tax on both producers and consumers would reduce the quantity traded in the market and potentially increase the market price. The exact impact on price depends on the relative elasticities of supply and demand, with the tax burden shared between consumers and producers.
Step-by-step explanation:
When a new tax of $5 on producers is introduced, it shifts the supply curve to the left, reflecting a decrease in supply due to the increase in production costs. On the other hand, a $5 tax on consumers decreases the demand because consumers now have to pay more for the same goods, which shifts the demand curve to the left. The joint effect of these two taxes is to reduce the market equilibrium quantity. The market price typically increases, although the exact change depends on the relative elasticities of supply and demand.
The tax burden is distributed between consumers and producers depending on these elasticities. In the case of beachfront hotels, the supply is inelastic and demand is elastic, which means producers will bear more of the tax burden since they cannot easily leave the market, while consumers can find alternatives more easily. Overall, both the quantity traded decreases and the market price adjusts to reflect the new taxes. This adjustment in the market equilibrium results in a lower quantity sold at a potentially higher price, reducing overall market efficiency.