5. The current equilibrium price per pack of cigarettes is $4. Every day 40 million packs ofcigarettes are sold. In order to recover some of the health care costs associated with smoking,the government imposes a tax of $2 per pack. This will raise the price to $5 per pack andreduce the quantity demanded to 30 million packs at that price, while the quantity supplied at$3per pack is now 30 million packs.a. Draw a supply and demand diagram of cigarettes before the tax. Label CS and PSb. On a new diagram, show the effect that the tax has by labeling the followingi. New consumer surplusii. New producer surplusiii. Government revenue from excise taxiv. Deadweight loss

Consumer surplus is the area above the price and below the demand curve. Producer surplus is the…

Answered: 5. The current equilibrium price per…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If the consumers' income increase from $200 to $300, the quantity demanded for product X will increase from 80 to 100 whereas, the quantity demanded for product Y fall from 90 to 63.a.What is income elasticity of demand for product X?b. What kind of product X to these consumers? c. What is income elasticity of demand for product Y ?d.What kind of product Y to these consumers?
The supply of wigits is pefectly elastic and the demand for wigits has a price elasticity of 2 and an income elasticity of 1 (a) If income increases by 25 percent then the equilibrium quantity will_____(increase, decrease, not change) by_____percent and the equilibrium price will ____ (increase, decrease, not change) (b) If a 25 percent tax is imposed on wigits then the quantity consumed will_____(increase, decrease, not change) by____percent and the equilibrium price, inclusive of the tax, will increase by____ percent.
Use the concept of Price Elasticity of Demand to explain why the public policy recommendation of raising taxes on cigarettes causes State revenues to rise while also effectively deterring smoking among young people. Be sure to consider availability of substitutes and the effect of the percentage spent of each buyer’s budget when formulating a response. Who bears the brunt of the tax – the consumer or the producer? Are there any potential negative side effects of increasing taxes on cigarettes?
Demand for face masks at a small newsstand outside an airport is less elastic than demand inside the airport if _______. Select one: a. people prefer not to wear face masks. b. specific brands of face mask don't work as well. c. there are fewer substitutes at the stores inside the airport d. face masks are required to enter the airport.
The schedule below shows the quantities of shoes demanded at each income level in a community from 2020 to 2021: Year Income (R) Quantity (units) 2020 5 000 1 000 2021 6 500 900 3.1 Calculate the income elasticity of demand, using the arc method and interpret your result. 3.2 List any four factors that could result in the shoes having inelastic price elasticity of demand. 3.3 Explain the importance of understanding the relationship between price elasticity of demand and total revenue.
2
Price Elasticity of Demand (Study Plan 4.1) 1. Rain spoils the strawberry crop, the price rises from $4 to $6 a box, and the quantity demanded decreases from 1,000 to 600 boxes a week. a. Calculate the price elasticity of demand over this price range. b. Describe the demand for strawberries. If the quantity of dental services demanded increases by 10 percent when the price of dental services falls by 10 percent, is the demand for dental services inelastic, elastic, or unit elastic? The demand schedule for hotel rooms is Price (dollars per room. per night) 200 250 400 500 800 Quantity demanded (millions of rooms per night) 100 80 50 40 25 a. What happens to total revenue when the price falls from $400 to $250 a room per night and from $250 to $200 a room per night? b. Is the demand for hotel rooms elastic, inelastic, or unit elastic?
1. Define PED stating the different values it may take and comment on it. 2. Sketch diagrams of demand curves with different elasticities and state how the elasticities are changing along the entire curves.
1. The table below shows the relationship between price, quantity and income. Price of A Qty Demand Qty Demand for A (units) for B (units) Qty Supply for A Income (RM) (RM) (units) 1.50 1500 20 1000 2500 3.50 1000 50 2000 3000 5.50 500 100 3000 3500 Calculate : (a) Price elasticity of demand for A when price change from RM1.50 to RM5.50. State the type of elasticity. (5 (b) Income elasticity of demand for B when income changes from RM3000 to RM3500. State the type of goods for B (c) Cross elasticity of demand for A and B when price of A changes from RM3.50 to RM1.50. State the relationship. (5 (d) Price elasticity of supply for A when price changes from RM1.50 to RM5.50
5 During the pandemic in 2020, many more people decided to use home delivery services in order to have meals delivered to them from the restaurant. Suppose the supply of home delivery services is perfectly elastic. You will be asked several questions about this situation. Explain how the pandemic affected the demand for home delivery services. Explain the effect on the equilibrium price and quantity of home delivery services. Explain the effect on the efficient quantity of home delivery services. Explain the effect on the total consumer surplus, the total producer surplus, and the total surplus in the market for home delivery services.
10. Problems and Applications Q10 Consider public policy aimed at smoking. Studies indicate that the price elasticity of demand for cigarettes is about 0.2. If a pack of cigarettes currently costs $5 and the government wants to reduce smoking by 10%, it should increase the price by If the government permanently increases the price of cigarettes, the effect on smoking 1 year from now will be from now. Studies also find that teenagers have a higher price elasticity of demand than do adults. Which of the following statements are consistent with this result? Check all that apply. 00 Adults are more likely to be addicted to cigarettes. smaller Teenagers do not have as much income as adults, so they are more price sensitive. larger It is legal for adults to consume alcohol, so many choose to spend their money on that good rather than cigarettes. % than the effect 5 years
5. At present, the price of $10, a football in the US and 5 million are sold annually. Market demand has shown that the demand curves are linear, and that price elasticity of market demand is -4.0 and the price elasticity of supply is +2.0. a) Calculate the demand and supply curves for footballs in the US. b) The US government imposes a $3 tax on every football sold in the country. How much revenue will the tax raise, and how much will the tax effect consumer surplus and producer surplus?|

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