i. The elasticity of demand for beer in country A is 1.8 and the elasticity of demand for beer in country B is 1.7. Suppose that the supply of beer is the same in both countries and that both countries impose the same level of tax on beer. Does the consumer in country A share more burden of tax? Suppose the demand curve for sugar is Q = 60-3P and the supply curve is Q 2P. Suppose the government announces a per-unit tax of 1 on the price of sugar. What is the deadweight loss from the tax?
i. The elasticity of demand for beer in country A is 1.8 and the elasticity of demand for beer in country B is 1.7. Suppose that the supply of beer is the same in both countries and that both countries impose the same level of tax on beer. Does the consumer in country A share more burden of tax? Suppose the demand curve for sugar is Q = 60-3P and the supply curve is Q 2P. Suppose the government announces a per-unit tax of 1 on the price of sugar. What is the deadweight loss from the tax?
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
Chapter17: Taxation And Resource Allocation
Section: Chapter Questions
Problem 4TY
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![i. The elasticity of demand for beer in country A is 1.8 and the elasticity of
demand for beer in country B is 1.7. Suppose that the supply of beer is
the same in both countries and that both countries impose the same level
of tax on beer. Does the consumer in country A share more burden of tax?
Suppose the demand curve for sugar is Q = 60-3P and the supply curve
is Q=2P. Suppose the government announces a per-unit tax of 1 on the
price of sugar. What is the deadweight loss from the tax?
Why do you think a policymaker and a consumer might interpret this
deadweight loss differently?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe8a6f34c-6199-4e45-a690-3a492ff2db75%2Fc86ca014-b1fc-4f87-a9d8-ac9900321802%2Fkpdr0z.jpeg&w=3840&q=75)
Transcribed Image Text:i. The elasticity of demand for beer in country A is 1.8 and the elasticity of
demand for beer in country B is 1.7. Suppose that the supply of beer is
the same in both countries and that both countries impose the same level
of tax on beer. Does the consumer in country A share more burden of tax?
Suppose the demand curve for sugar is Q = 60-3P and the supply curve
is Q=2P. Suppose the government announces a per-unit tax of 1 on the
price of sugar. What is the deadweight loss from the tax?
Why do you think a policymaker and a consumer might interpret this
deadweight loss differently?
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