Recent research estimates that the short-run price elasticity of demand for gasoline in the U.S.is -0.3, and the long-run price elasticity of demand is -1.4. What happens if the government increases the federal gasoline tax? Consumer expenditures on gasoline decrease over the short run and long run. Consumer expenditures on gasoline increase over the short run and decline over the long run. Consumer expenditures on gasoline decline over the short run and increase over the long run. Consumer expenditures on gasoline increase over the short run and long run.

Recent research estimates that the short-run price elasticity of demand for gasoline in the U.S.is -0.3, and the long-run price elasticity of demand is -1.4. What happens if the government increases the federal gasoline tax? Consumer expenditures on gasoline decrease over the short run and long run. Consumer expenditures on gasoline increase over the short run and decline over the long run. Consumer expenditures on gasoline decline over the short run and increase over the long run. Consumer expenditures on gasoline increase over the short run and long run.

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

Chapter6: Demand And Elasticity

Section: Chapter Questions

Problem 3TY

See similar textbooks

Similar questions

The price elasticity of demand is -3, the price elasticity of supply is 1. The government imposes a per-unit tax of 80 Cents on the sale of a cup of coffee in paper cups. Compute how much of the 80 Cents per cup is actually borne by the consumer and how much is borne by the seller.
Q9
In the state of Santa Lucia cigarettes were selling for $8.03 per pack before a $0.25 per pack increase. Last year about 3.8 million pack of cigarettes were sold per month at $8.03 per pack. The price elasticity of demand for cigarette packs is -1.35. How much revenue, in millions of dollars, will be produced each month from this new tax?
Price $3.50 3 2.50 $0.25 $1.00 1,200 1,500 $0.50 Supply The figure above illustrates a market for gasoline with a $1 tax imposed on the buyers. What is the seller's tax incidence? Between $0.00 and $1.00 depending on elasticity of supply. Demand Demand + $1 tax Quantity
The elasticity of demand for chocolate chip cookies is 0.6 and the elasticity of supply for these cookies is 1.9. If a tax is imposed on purchases of chocolate chip cookies, then the consumers would pay more of the tax. consumers would pay the entire tax because their demand is less elastic than the producers' supply. tax would be equally shared by the consumers and the producers. producers would pay more of the tax.
Suppose an economist estimates that the price elasticity of supply for red wine is 2.4 while its price elasticity of demand is -4.0. If the government decides to impost a per-unit sales tax of $40 per bottle of red wine, how would the market price for red wine be affected? Show your calculation.
The government's policy goal is to reduce sugar consumption since consuming a lot of sugar is linked with negative health outcomes such as diabetes and hearth disease. In order to discourage consumers from consuming sugary soft drinks, the government is considering placing a sales tax on soda. Government economists have estimated the price elasticity of demand is -2.Which of the following statements is true? a.The tax on sugary soft drinks will likely decrease the demand for sugar-free soft drinks. b.Since consumers' demand for sugary soft drinks is elastic, the tax on sugary soft drinks will likely raise considerable revenue but likely will not reduce the consumption of sugary soft drinks by consumers. c.Since consumers' demand for sugary soft drinks is elastic, the tax will likely work to discourage sugary soft drink consumption. d.Taxes do not discourage consumers from consuming products.
Suppose an economist estimates the price elasticity of demand for sugary drinks is -4.2, while its price elasticity of supply is 1.2. If the government decides to impose a per-unit tax of $9 per can of sugary drinks sold, how would the market price of sugary drinks be affected? Show your calculation
Suppose that the government enacts a tax on retail sales of road salt, which homeowners and businesses put on walkways and driveways. Assume that the supply of salt is perfectly elastic, due to the ease with which suppliers can stockpile the product.Before the tax, 900 fifty-pound bags of road salt are sold at an equilibrium price of $7 per bag. After the tax, 775 bags are sold at $8 per bag. How much revenue does the tax generate for the government? What is the amount of the tax? $
on 18 of 75 The price elasticity of demand for lychee fruit is 1.3, while the price elasticity of supply is 0.7. The incidence of a $0.25 excise tax placed on lychee fruit will be higher for consumers. equal for producers and consumers. nonexistent for both producers and consumers. higher for producers.
Please help with the following question
The demand for salt is price inelastic and the supply of salt is price elastic. The demand for caviar is price elastic and the supply of caviar is price inelastic. Suppose that a tax of $1 per kilogram is levied on the sellers of salt and a tax of $1 per kilogram is levied on the buyers of caviar. Who would we expect to have to pay most of these taxes? Question 29Answer a. the sellers of salt and the sellers of caviar b. the buyers of salt and the buyers of caviar c. the sellers of salt and the buyers of caviar d. the buyers of salt and the sellers of caviar