Suppose the demand curve is perfectly inelasticand the government imposes a tax of $2 per unit.What portion of the tax will be paid by theproducer?

Perfectly inelastic demand curve shows the flexibility of interest where the interest changes with…

Answered: Suppose the demand curve is perfectly…

Suppose the demand curve is perfectly inelastic and the government imposes a tax of $2 per uni What portion of the tax will be paid by the producer?

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter5: Price Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 15SQP

See similar textbooks

Similar questions

What is a sin tax? Should we tax sugary drink? Mention its relationship to elasticity.
If you estimate a price elasticity of demand equal to 1.25 (negative sign is implied), do consumers orproducers shoulder more of a tax on the relevant good? Explain briefly.
a. Assume that the elasticity of demand for Fanta is -0.5 while the elasticity of supply is 0.7. Assuming further that a tax of K10 is applied on each bottle of Fanta sold, how much of this will be borne by producers. b. Assume that the price of good X is K10 while that of good Y is K20. A consumer has allocated consumption between the two goods in such a way that the marginal utility of X is 15 utils and that of Y is 25 utils. Is this an optimal consumption bundle? If not, what should the consumer do to reach the optimum?
A few years ago, the United State PostalService commissioned a study into theprice elasticity of demand for postagestamps. The study found that own priceelasticity of demand is relatively inelastic.If that is the case, how will the UnitedState Postal Service’s revenue change ifthey increase the price of stamps?A) Increasing the price of stamps will increase revenueB) Increasing the price of stamps will decrease revenueC) Increasing the price of stamps will notchange revenueD) There is not enough information to say
Please helo me with this question There are 50 residents that live in a small town in California. Each resident uses electricity and there is one power station that produces electricity for the residents from coal. Each residents' demand for electricity is Q = 10 - 2P and the supply function for the power plant is Q = 150P. For each unit of electricity that the power station produces, there is a corresponding release of pollution that leads to asthma and other health problems for the 50 residents. The marginal damage of each unit of electricity produced, per person, is $.05. a. What is the market equilibrium price and quantity per unit of electricity? b. What is the efficient Pigouvian tax per unit of pollution? c. The government of this small California town decides to impose the efficient Pigouvian per unit tax on the power station. What is the new social optimum price and quantity per unit of electricity? d. What is the government tax revenue? e. What is the gain in total…
Epi-pens are a name-brand medicine. Epi-pens are used to quickly inject epinephrine into the body in the event of a severe allergic reaction. Many Americans require Epi-pens due to potentially life-threatening allergies. Using the concept of elasticity, explain why the government would likely not impose a tax on the market for Epi-pens. Suppose the government believes the price of Epi-pens is too high, so they impose a price control on the market. Would the government use a price floor or a price ceiling in this situation? What effect would the chosen price control have on the market. Suppose that the number of adults developing severe allergies increases. At the same time the patent for Epi-pens expires, allowing new producers of Epi-pens to enter the market. Explain what will happen to the equilibrium price and quantity of Epi-pens.
You have data on Meena's quantity demanded for craft beer and theirincome. According to this data when Meena's income falls by 7% theassociated change in their quantity demanded for beer is 11%. You don'tknow if it is an increase or decrease in quantity demanded. From pastresearch you know that craft beer is a normal good for Meena. Use thisinformation to calculate Meena's income elasticity of demand.
What is consumer surplus
What is the relationship betweensupply and demand?
The following figure depicts two demand curves D1 and D2. D. B D2 Note that we can re-write the definition of elasticity from the core text as P AQ Q ΔΡ AQ / Q -= 3 ΔΡΙΡ i.e. it is equal to the product of the ratio of price to quantity, P/Q, and the slope of the demand curve, which fior both of the demand curves in the chart above is constant. Note also that by convention the demand curve is always drawn with Q on the x-axis, so as drawn, the slope of the demand curve is ДР 1 AP Which of the following statements are correct? Select one or more: а. Demand curve Dj is more elastic than D2 b. Demand curve D2 is less elastic than demand curve D1. С. At the point where the two curves cross D2 is more elastic than D1. d. At some points on demand curve D2 the elasticity of demand is lower than at some points on demand curve D1
Both airlines and supermarkets offer customer loyalty programs. However, airline frequent flyer programs seem to be much more profitable. In 2020, the American Airlines AAdvantage program in the United States was appraised to be worth over US$19.5 billion.a. Business executives often fly at the expense of their employer or clients. By contrast, leisure travelers typically pay for their own travel. Compare the price elasticity of the demands for air travel of business vis-à-vis leisure travelers.b. Explain how frequent flyer programs exploit the price inelastic demand of business travelers.c. European low-cost airline Ryanair caters mainly to people traveling for pleasure at their own expense. Can this explain why Ryanair does not run a frequent flyer program?d. Discuss whether there is a substantial segment of supermarket customers who shop at the expense of others.e. Drawing on your answers above, explain why airline frequent flyer programs yield more profit than supermarket loyalty…
Suppose a local supermarket runs a discount campaign on the sales of shampoos using discount coupons – any customer who shows a discount coupon will be offered an X% discount on the original retail price. BLACK :X% FRIDAY OFE dreamstime Briefly explain the economics behind this discount campaign. а. dieamtme. eame dreamstime