In order to reduce environmentally harmful emissions, the state of California wanted todiscourage the use of large SUVS. The state found that the demand and supply schedules ofSUVS were the following:Price of SUVS Quantity of SUVS DemandedQuantity of SUVS Supplied(in thousands)450(in thousands)$33,000$32,000$31,000$30,000$29,000$28,000$27,000$26,000$25,000$24,00010040020035030030040025050020060015070010080050900d) Suppose that due changes in a combination of factors including higher gas prices,changes in consumer preferences and reduced incomes, the demand for SUVS hasbecome more elastic since the data on demand was collected. How would this effectwho bears the burden of the tax? How would it effect the amount of deadweight loss?

Elasticity is defined as the responsiveness or sensitiveness on the demand if the factor influencing…

d) Suppose that due changes in a combination of factors including higher gas prices, changes in consumer preferences and reduced incomes, the demand for SUVS has become more elastic since the data on demand was collected. How would this effect who bears the burden of the tax? How would it effect the amount of deadweight loss?

d) Suppose that due changes in a combination of factors including higher gas prices, changes in consumer preferences and reduced incomes, the demand for SUVS has become more elastic since the data on demand was collected. How would this effect who bears the burden of the tax? How would it effect the amount of deadweight loss?

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter16: Externalities, The Environment, And Natural Resources

Section: Chapter Questions

Problem 4DQ

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