Suppose that a per-unit tax of 25 centavos per pack is placed on the sale of cigarettes by the government, shifting the market supply of cigarettes from S to S' as shown. Answer the following questions regarding this case. 1. Determine burden of the tax under different demand conditions (i.e., when demand is D, and when demand is D2). Who gets most of the burden of the tax under different demand conditions? 2. Prove that the increase (or change) in the price is dependent on the elasticity of demand and supply, under different demand conditions (i.e., when demand is D, and when demand is D2). 3. What tax revenue is expected by the government if the demand for cigarettes is D,? Is D;? Note: Show supporting calculations. Price ($ per pack) 1.50 1.40 1.30 1.25 1.15 D: D2 Quantity (Millions of pack) 4 5 3.

Suppose that a per-unit tax of 25 centavos per pack is placed on the sale of cigarettes by the government, shifting the market supply of cigarettes from S to S' as shown. Answer the following questions regarding this case. 1. Determine burden of the tax under different demand conditions (i.e., when demand is D, and when demand is D2). Who gets most of the burden of the tax under different demand conditions? 2. Prove that the increase (or change) in the price is dependent on the elasticity of demand and supply, under different demand conditions (i.e., when demand is D, and when demand is D2). 3. What tax revenue is expected by the government if the demand for cigarettes is D,? Is D;? Note: Show supporting calculations. Price ($ per pack) 1.50 1.40 1.30 1.25 1.15 D: D2 Quantity (Millions of pack) 4 5 3.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If the tax is imposed on the sellers, shouldn't the 'T' be used alongside the supply 'q' not the demand 'q'? So would it not be q=b(p-T)-a?
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a) The government decides to impose a unit-tax on producers instead of a unit-sales tax on consumers, arguing that this will protect consumers from negative effects of the tax. Your response to this statement should be that O This is incorrect reasoning, because consumers actually will be affected more by the tax on production than a sales tax O This is incorrect reasoning, because consumers are always hit harder by a sales tax O This is incorrect reasoning, because it doesn't matter whether the tax is imposed on sales or production, the impact is the same O This is the correct reasoning, because consumers do not pay for the production. b) Tom likes eBooks and iTunes. eBooks cost $4 and provide a marginal utility of 10; iTunes cost $1 and provide a marginal utility of 3. To maximize utility for the given budget, Tom should O Buy more eBooks and fewer iTunes O Buy fewer eBooks and more iTunes O Not change his current consumption choice
P = -4Qd +50 P = 40, +10 A tax of 8JD is imposed on every unit sold Answer the question in accordance with the following graph 1. Equilibrium quantity before tax is imposed : a) 5 b) 25 c) 15 E) Otherwise 2. Equilibrium price before tax is imposed : a) 45 b) 55 c) 70 E) Otherwise 3. Equilibrium quantity after tax is imposed : a) 30 b) 25 c) 15 E) Otherwise 4. Equilibrium price after tax is imposed : a) 45 b) 55 c) 70 E) Otherwise 5. Values of dimensions at point A: a) 0,100 b) 0,50 c) 0,120 E) Otherwise 6. Values of dimensions at point B: b) 60,0 a) 30,0 c) 50, 0 E) Otherwise 7. Portion of the tax born by consumer is: a) 30 b) 5 c) 20 E) Otherwise 8. Portion of the tax born by producer is: a) 10 b) 20 c) 30 E) Otherwise 9. The distance FC is : a) 5 b) 10 c) 50 E) Otherwise 10. The slope of the demand function is : b) -2 a) 2 c) 4 E) Otherwise hand written plz d) 10 d) 30 d) 10 d) 100 d) 50,0 d) 0,10 d) 10 d) 25 d) 80 d) -4
The annual demand for liquor in a certain state is given by the following equation: QD=500.000-20.000P where Pis the price per gallon and QD is the quantity of gallons demanded per year. The supply of liquor is given by the equation Qs=30.000P. Now assume that a unit tax of 1$ is levied on the sellers of the commodity (i.e. statutory incidence is on the producers). (e) What is the government's tax revenue? (f) Determine how much of the total tax is actually paid by th (g) Determine how much of this total tax is actually paid by t (h) Compute the social welfare loss(i.e., dead-weight loss) tax.
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Was able to get the first two, but having trouble figure out the answers to one decimal place on the following:
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)..