Now suppose that the price elasticity of demand is 1, price elasticity of supply is 2, and a 25 % excise tax is levied on consumers. Which of the following changes in a market will reduce the burden of the tax on consumers? Elasticity of demand rises to 2. Nothing will change the burden of the tax. Elasticity of demand falls to 0. Taxing authorities levy the tax on suppliers.

Now suppose that the price elasticity of demand is 1, price elasticity of supply is 2, and a 25 % excise tax is levied on consumers. Which of the following changes in a market will reduce the burden of the tax on consumers? Elasticity of demand rises to 2. Nothing will change the burden of the tax. Elasticity of demand falls to 0. Taxing authorities levy the tax on suppliers.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Would consumer or producer carry the burden of tax if good is elastic? Show on a graph
The greater the elasticity of demand, the smaller the deadweight loss of a tax. True False
Tax revenue is likely to fall due to a higher tax rate if the elasticity of demand is 0.2 and the elasticity of supply is
Doyle and Samphantharak (2008) find that when a 5% gas tax is implemented, prices consumers pay for gas increase by about 4%. What role does demand elasticity play in determining the size of this price change? That is, under what demand elasticity cases would the price change be closer to 5%, or closer to 0%? Illustrate and explain using supply-and-demand graph(s)..
Now assume the government raises the tax from $1.00 to $1.50. This causes sale to decline from 10,000 units to 5,000 units. a) calculate the price(tax) elasticity of demand. b) is it elastic, inelastic, or unit elastic? c) what happens to total tax revenue?
A tax targeted to reduce consumption of a good by a specific quantity will raise the most revenue when: supply is inelastic and demand is elastic. supply is elastic and demand is inelastic. both supply and demand are elastic. both supply and demand are inelastic.
Suppose the government applies a specific tax to a good where the demand elasticity, E, is -1.4, and the supply elasticity, n, is 1.2. This good would not be an ideal good for the government to tax since demand is: A. inelastic and would raise much revenue B. elastic and would raise much revenue C. inelastic and would not raise much revenue D. elastic and would not raise much revenue what is the tax incidence on consumers? $?
The figure below illustrates the effect of an excise tax (per unit tax) imposed on buyers (D means demand and S means supply). How much of the tax revenue is actually paid by buyers? Price $60 $40 $30 E 1 E 10 40 50 S after D tax D Quantity
When demand is more elastic than supply, demanders pay a smaller share of the tax and sellers pay a larger share of the tax. Select one: a. False b. True
If the purpose of a tax is to decrease the amount of a harmful activity, then the taxwould be most effective when the supply is ________ and the demand is ________A) elastic; elasticB) inelastic; inelasticC) elastic; inelasticD) inelastic; elastic
As price elasticity of demand increases, the burden of a tax gets _______; as price elasticity of supply increases, the burden of a tax gets _________. (Here, you can read "bigger" as "heavier" and "smaller" as "lighter" if that helps.) bigger; bigger smaller; smaller bigger; smaller smaller; bigger
18) The government unit that wants to achieve "revenue enhancement" will find it considerably more favorable to impose tax on goods whose demand is A) highly elastic. B) relatively elastic. C) highly inelastic. D) unitary elastic.