Comparing the market for Airbnb rentals for the two years is complicated by the fact that the graph depicts three changes: total demand increases,total supply increases, and the slope of the demand curve changes. To isolate the effect of elasticity on deadweight loss and government revenue,consider the following scenario:Suppose the government wants to estimate the tax revenues from room rentals for 2030, and economic models predict two differentscenarios (A and B), each with a different demand curve (labeled Demand, and Demandg, respectively, on the following graph).Use the objects to the right of the graph to help you determine the potential deadweight loss and revenues generated by the same $30 tax in 2030under each scenario and enter these values into the following table. (Note: You will not be graded on your placement of any of the objects on thegraph.)200Demand,190Tax Revenue180Demand,170160Deadweight Loss150140130120110Supplyc30100204060100120140160180200RENTALS (Rooms per day)PRICE (Dollars per rental) Deadweight LossTax RevenueScenario(Dollars per day)(Dollars per day)ABUnder scenario A, demand is relativelyelastic, and the tax results in adeadweight loss andgovernment revenue thanunder scenario B. This suggests that, all other things being equal, the government should tax industries with a relativelyelasticity ofdemand if it wants to minimize deadweight loss.

The equilbrium price and quantity of a good sold in the market are determined by the forces of…

Answered: Comparing the market for Airbnb rentals…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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According to studies undertaken by the U.S. department of agriculture, the price elasticity of demand for cigarettes is between -0.3 and -0.4. Suppose congress, influenced by studies linking cigarette smoking to cancer plans to raise the excise tax in cigarettes so the price rises by 10 percent. The expected effect the price increase will have on cigarette consumption is?
The price of coffee rose sharply last month, while the quantity sold remained the same. Five people suggest various explanations: Leonard: Demand increased, but supply was perfectly inelastic. Sheldon: Demand increased, but it was perfectly inelastic. Penny: Demand increased, but supply decreased at the same time. Howard: Supply decreased, but demand was unit elastic. Raj: Supply decreased, but demand was perfectly inelastic. Who could possibly be right? Use graphs to explain your answer.
7. Effect of a tax on buyers and sellers The following graph shows the daily market for wine. Suppose the government institutes a tax of $40.60 per bottle. This places a wedge between the price buyers pay and the price sellers receive. 200 180 160 Demand Supply 140 120 100 Tax Wedge 60 40 20 100 200 00 400 500 B00 00 1000 00 QUANTITY (Botles of wine) PRICE (Dolars per bottle)
Using the midpoints formula presented in the textbook, calculate the price elasticity coefficient for each price level, starting with the coefficient for the $4 to $6 level. For each coefficient, indicate each type of elasticity: elastic demand, inelastic demand, or unitary demand. Post your answers into the table, Figure 1. Assume that the income of consumers changes by 10%, and as a result the quantity demanded for Good A changes by 8%. What is the income elasticity of demand for Good A? What does this mean for your company? Assume that the price of competing Good B decreases by 5% and as a result, the quantity demand for Good A decreases by 8%. What is the cross-price elasticity for your product? What type of goods are Good A and Good B?
Let p denote the price of good X and consider the demand for good X of the following two consumers Dan: XD 191/p Sam XS = 142-8p = Assume Dan and Sam are the only consumers interested in this good. What is the absolute value of the price elasticity of the aggregate demand for good X at the point where p = 1? You must input a positive number. Do not input a ratio, e.g. 2/9.
Explain how a policymaker who is considering how to raise tax revenues from fuel and vehicles should make use of the insights from your elasticity analysis in
The table below illustrates the market for Internet services. Use a demand-supply graph to answer the following. Draw a graph of the market for internet services before the tax (only plot the supply and demand functions). Suppose the government imposes a $15 tax per month on the supply side of the market. Sketch the new supply function after the tax.
The bar graph below shows the percentages of income spent on food (i.e., the portion of a consumer's budget devoted to food spending) and the elasticities of demand (in absolute value) for several countries' residents. [Click on the bar graph to open a PDF viewable version in another tab.] Malawians Haitians Bangladeshis Indians Brazilians Koreans. Greeks Italians Australians French Canadians Americans Percentage of Income spent on Food 17% 15% 14% 12% W 31% 28% 35% 40% X 56% Elasticity of Demad 66% 81% 75% According to the bar graph, which of the answer choices is correct? Malawians spend less money on food than Australians. French spend less money on food than Brazilians. Bangladeshis spend a larger percentage of their income on food than Americans. O Canadians spend a larger percentage of their income on food than Koreans
Which of the following statements best describes the elasticity of Good X along the demand curve? Select the correct answer below: 1.Price elasticity of demand is constant along the demand curve. 2.Price elasticity of demand increases (in absolute value) as price increases. 3.Price elasticity of demand decreases (in absolute value) as price increases. 4. Demand for Good X is perfectly elastic, or infinitely elastic at each price level.
Assuming a supply function of Qs = 100+100p and a demand function of Qd = 700-50p and an equilibrium price of $4 with an equilibrium quantity of 500million gallons please answer the following
12. Effect of a tax on buyers and sellers The following graph shows the daily market for wine when the tax on sellers is set at $0 per bottle. Suppose the government institutes a tax of $23.20 per bottle, to be paid by the seller. (Hint: To see the impact of the tax, enter the value of the tax in the Tax on Sellers field and move the green line to the after-tax equilibrium by adjusting the value in the Quantity field. Then enter zero in the Tax on Sellers field. You should see a tax wedge between the price buyers pay and the price sellers receive.) Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. 180 160 140 120 4 100 80 60 Demand 40 20 PRICE (Dollars per bottle) 200 0 0 Supply 50 100 150 200 250 300 350 400 450 500 QUANTITY (Bottles of wine) Graph Input Tool Market for Wine…
Suppose that a large city has dozens of apartment complexes that are nearly identical in terms of size, age, and amenities. Assume the demand curve for an apartments at an individual complex is perfectly elastic. If the city places an excise tax on apartments, who will pay the tax? What will happen to the quantity demanded. Explain and show graphically. For graphical purposes, assume the supply of apartments is upward sloping.

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