Australian government have suggested that they might need to increase GST to help fund the COVID-19 rescue package. GST is a tax on goods and services usually paid at the point of sale. Consider the market for bread. Suppose a loaf costs $4.15 and includes a 15-cent tax per loaf. q1- If the government increases the tax to 20 cents per loaf, will the price for bread go up to $4.20? Explai
Australian government have suggested that they might need to increase GST to help fund the COVID-19 rescue package. GST is a tax on goods and services usually paid at the point of sale. Consider the market for bread. Suppose a loaf costs $4.15 and includes a 15-cent tax per loaf. q1- If the government increases the tax to 20 cents per loaf, will the price for bread go up to $4.20? Explai
Chapter1: Making Economics Decisions
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The Australian government have suggested that they might need to increase GST to help fund the COVID-19 rescue package. GST is a tax on goods and services usually paid at the point of sale. Consider the market for bread. Suppose a loaf costs $4.15 and includes a 15-cent tax per loaf.
q1- If the government increases the tax to 20 cents per loaf, will the
Expert Solution
Step 1
An increase in the tax will increase the market price of the loaf of bread in the market. The old price with tax was 4.15 $ and the new price after tax increased to 20 cents will be 4 $ + 0.20 cents tax = 4.20 $. The price of bread will go up as it is necessasity good and have less elastic demand
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