When airfares between Santa Rosa and Los Angeles averages $69, the quantity consumed is 42,500 tickets. One day, an airline tax is levied equal to $10.00 and output falls to 37,000 tickets. Assume that air travelers end up paying 75% of the tax. Briefly describe how you would illustrate the market for air travel before the tax? Due to the tax, briefly describe what happens to supply and/or demand The tax causes the Qd of air travel to ____ and Qs of air travel to ____ The new price paid by air travelers
When airfares between Santa Rosa and Los Angeles averages $69, the quantity consumed is 42,500 tickets. One day, an airline tax is levied equal to $10.00 and output falls to 37,000 tickets. Assume that air travelers end up paying 75% of the tax. Briefly describe how you would illustrate the market for air travel before the tax? Due to the tax, briefly describe what happens to supply and/or demand The tax causes the Qd of air travel to ____ and Qs of air travel to ____ The new price paid by air travelers
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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- When airfares between Santa Rosa and Los Angeles averages $69, the quantity consumed is 42,500 tickets. One day, an airline tax is levied equal to $10.00 and output falls to 37,000 tickets. Assume that air travelers end up paying 75% of the tax.
- Briefly describe how you would illustrate the market for air travel before the tax?
- Due to the tax, briefly describe what happens to supply and/or demand
- The tax causes the Qd of air travel to ____ and Qs of air travel to ____
- The new
price paid by air travelers is ____
- The new price received by airlines is ______
- Carefully identify the area of new
consumer surplus after the tax
- Carefully identify the are of new
producer surplus after the tax
- The loss of output and increase in price due to the tax creates a ____ to this market
- Total expenditures or sales of air travel will be____.
- Total revenues generated by airlines will be _____
- Total tax revenue generated by the government will be ____
- Total taxes paid by air travelers will be ____
- Total taxes paid by airlines will be ____
- Calculate the price elasticity of demand and & interpret coefficient. Use the general formula, not the mid point formula
- Calculate the price elasticity of supply and interpret coefficient. Use the general formula, not the mid point formula.
- How do total sales in the airline market before and after the tax support your answer in (n) and/or (o)?
Please answer the underlined questions
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