Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 19, Problem 2.2P
(a)
To determine
Identify the role of the payroll tax on labor supply.
(b)
To determine
Identify the role of corporate income tax on the
(c)
To determine
Identify the role of the payroll tax on labor supply.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Suppose a tax on wages is passed to finance a government program. The legislation orders a tax of 12.4% on per hour wage earnings with 6.2% to be paid by employers and 6.2% to be paid by workers. Assume labor supply is more inelastic than labor demand. Under these assumptions, describe the economic burden of the tax?
a.The economic burden will be fully on workers.
b. The economic burden will be fully on employers.
c. The economic burden will be distributed in equal amounts to workers and employers.
d. The economic burden will be mostly on workers and less on employers.
Suppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.8 and 0.7 respectively. Suppose the government imposes a per-unit tax of $45
Some economists believe that a sales tax, in general, is undesirable. Explain. Despite this, why do most countries still impose a tax on cigarette? Explain plausible arguments.
Suppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.8 and 0.7 respectively.
Suppose the government imposes a per-unit tax on the cigarette sellers. Who, buyers or sellers, would share a heavier tax burden? Explain your answers without calculation.
Chapter 19 Solutions
Principles of Economics (12th Edition)
Knowledge Booster
Similar questions
- Suppose legislation is passed stating that a per unit tax of $.50 per gallon of gasoline must be paid by energy suppliers. Assuming demand for gasoline is more inelastic than supply of gasoline. Will the tax discourage driving? a. Not at all as the tax burden will be entirely on firms as it is required by law to pay it. b. Driving may decline but possibly only slightly as demand is inelastic. c. Driving will decline considerably regardless of how demand is inelastic. d. Driving may decline by a significant amount particularly if demand is perfectly inelastic.arrow_forwardWhen demand is elastic Draw a diagram and explain how consumer burden is determined how producer burden is determined who pays the bigger burden of the tax how tax affects the efficiency of the market clearly explain and show the government tax revenue clearly explain and show the deadweight lossarrow_forwardSuppose legislation is passed stating that a per unit tax of $.50 per gallon of gasoline must be paid by energy suppliers. Assuming demand for gasoline is more inelastic than supply of gasoline, then the tax revenue economically generated by this tax comes from? a. The tax payment by the energy suppliers as they are ordered by law to pay the tax. b. The price disruption caused by the tax and the revenue will economically come from suppliers more so than consumers. c. The price disruption caused by the tax and the revenue will economically come from consumers more so than firms. d. The price disruption caused by the tax and the revenue will economically come from consumers and firms in equal amounts.arrow_forward
- Consider the market for junk food. Illustrate and explain the effects on price, quantity and the incidence of the tax due to the imposition of a tax if demand is (a) relatively elastic and (b) relatively inelastic.arrow_forwardThe market for soft drinks is perfectly competitive. Assume that the supply of soft drinks is point elastic and upward sloping. The government imposes a consumer tax on soft drinks. If point elasticity of demand is inelastic, is the deadweight loss generated by the tax higher or lower relative to where the point elasticity of demand is elastic? Explain why.arrow_forwardHow do the relative elasticities of supply and demand determine tax or subsidy incidence?arrow_forward
- Do you think profit could be maintained if the tax burden were simply passed on to the consumers in the form of higher selling price? How will this affect sales? Explain.arrow_forwardConsider the market for BP gasoline. If the market has a very elastic supply and a very inelastic demand, how would the burden of a tax on BP gasoline be shared between producers and consumers? Draw a graph to support your answer.arrow_forwardSuppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.6 and 0.8 respectively. a. Suppose the government imposes a per-unit tax on the cigarette sellers. Who, buyers or sellers, would share a heavier tax burden? Explain your answers without calculation. b. Suppose the government imposes a per-unit tax of $40 on the cigarette sellers. By how much would buyers and sellers of cigarettes share the tax burden respectively? Show your calculation. c. Suppose many small sellers, such as newsstands, complain the heavy tax burden borne by them. Would it be better to these small sellers if the government decides to impose a $20 per-unit tax on both the buyers and the sellers of cigarette? Explain.arrow_forward
- 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; elasticarrow_forwardPlease solve 4 part I Give upvote and good feedback.arrow_forwardSuppose legislation is passed stating that a per unit tax of $.50 per gallon of gasoline must be paid by energy suppliers. Assuming demand for gasoline is more inelastic than supply of gasoline, then the economic burden of this tax? a. Will be equally experienced by energy suppliers and consumers. b. Gasoline prices will be disrupted by the tax and this disruption will harm consumers more than energy suppliers. c. Gasoline prices will be disrupted by the tax but this disruption will harm only energy suppliers since they are ordered by law to pay the tax. d. Gasoline prices will be disrupted by the tax and this disruption will harm suppliers more so than consumers.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Microeconomics: Principles & PolicyEconomicsISBN:9781337794992Author:William J. Baumol, Alan S. Blinder, John L. SolowPublisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Macroeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Microeconomics: Principles & Policy
Economics
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:Cengage Learning