On July 1, 1965, the federal ad valorem taxes on many goods and services were eliminated. Comparing prices beforeand after this change, we can determine how much the price fell in response to the tax's elimination. Given an advalorem tax of v, the tax collected on a good that sold for p was vp. If the price fell by vp when the tax was eliminated,consumers must have been bearing the full incidence of the tax. Consequently, consumers got the full benefit ofremoving the tax from those goods. The entire amount of the tax cut was passed on to consumers for all commoditiesand services that were studied for which the taxes were collected at the retail level (except admissions and club dues)and for most commodities for which excise taxes were imposed at the manufacturer level, including face powder, sterlingsilverware, wristwatches, and handbags (Brownlee and Perry, 1967). List the conditions (in terms of the elasticities orshapes of supply or demand curves) that are consistent with 100% pass-through of the taxes. Use graphs to illustrateyour answer.For 100% of a tax cut to benefit customers, the price elasticity of demand must beor the price elasticity ofsupply must beQ, Quantityp, $ per unit

Case1 :- When the demand curve is perfectly inelastic, the whole burden will be born by the…

Answered: On July 1, 1965, the federal ad valorem…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume the state of Alaska placed a tax on playing cards of 7 cents per pack. If the state generated $42630 in revenue, how many packs of cards were sold?
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)..
Assume two normal and ordinary goods A and B. If the good A is taxed and its compensated demand is constructed around the customer after tax utility level, would the excess burden due to tax on A from the customer's compensated demand be greater or less than her deadweight loss from her ordinary (uncompensated) demand? Use the effects to explain.
According to studies undertaken by the U.S. department of agriculture, the price elasticity of demand for cigarettes is about +0.5. Suppose a major brokerage firm advised its clients to buy cigarette stock under the assumption that, if consumer income rise by 50 percent as expected over the next decade, cigarette sales would double. Based on the fundamental economic principles on income elasticity of demand, a reasonable reaction to this investment advice would be?
In 2014, the Spanish government passed a law to change a regulation, known as the "Beckham law", on foreign athletes. This new law will require foreign professional athletes to pay the standard Spanish tax rate of 52 percent on earnings of more than 300,000 euros, up from the 24 percent rate they had been paying since 2005. For top-quality players, the elasticity of migration under the Beckham law was estimated to be 1.80 based on the average annual tax rate. Using this estimate of elasticity, the migration of top quality players to Spain should decrease by%. Round your response to the nearest two decimal places.
Suppose you are an aid to the Odododiodo Member of Parliament who is concerned about the impact of a new tax on the welfare on his constituents. You have explained to him that one of the ways he can determine the impact is to calculate the price elasticity as well as the consumer surplus. Conduct a formal analysis by undertaking the following exercises when the demand and supply functions for the goods in question are given as Qd=500-5p and Qs=2p-60 a. Sketch the supply and the demand curves.b. Calculate the equilibrium price and quantity.c. If government imposes a tax of ¢2 on this commodity, calculate the new price and quantity afterthe imposition of the taxd. Calculate the consumer surplus before the taxe. Calculate the own price elasticity of demand before the imposition of the tax.
Demand Function:Qd=4,000−200pSupply function:Qs=100p−500 A president is presenting instituitiong a tax that will reduce quanityt to 500 units, the presdient says it will increase total surplus becasue of the revenue a) If the presdient wants to reduce the quantity sold in this market to be equal to 500 units, then what size tax does the presdient need to put? b) What is the Buyer’s and Seller’s Incidence of this tax? c) What is the Consumer Surplus, Producer Surplus, and Revenue Raised?
Consider an ad-valorem tax on a good X. The Demand for good X is constant elasticity with elasticity -2. The Supply for good Y is constant elasticity with elasticity 3. Consider the same setting as for the previous question. When a tax of 1% of the price is imposed on good X, then equilibrium quantity of X exchanged declines by what percentage?
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?
Suppose that the equilibrium quantity in the market for gadgets has been 85,000 per month. Then a tax of $6 per gadget is imposed on gadgets. As a result, the price paid by buyers increases by $4 and the after-tax price received (and kept) by sellers falls by $2. Given this tax imposition, the government is able to raise $481,740 per month in tax revenue. We can conclude that the imposition of the tax (x) has caused a deadweight loss by an amount more than $13,750 but less than $14,500 per month. (y) has reduced the equilibrium quantity of gadgets by more than 4,450 but less than 4,675 gadgets per month. (z) has reduced consumer surplus by more than $328,750 per month and has reduced producer surplus by more than $164,775 per month.
Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
In Brisbane there is a small population of musicians who play the harp. The quantity demanded for a specific student harp, used by music students, when priced at $11,500 is 20 harps. However, the quantity demanded for the same student harp when priced at $17,500 is only 8 harps in Brisbane. 1. All individual student harp players will always have the same willingness to pay for a harp. 2. If the harp differs in price and quantity demanded (ceteris paribus), then a demand schedule can be constructed. 3. A new music university opens in Brisbane where students enrol to study and learn the harp. These additional new players need to be included in the market demand for student harps. Which of the above statements are true: Only 1 is true. Only 2 is true. Both 1 and 2 are true. Both 2 and 3 are true. All three are true.

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