Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 19, Problem 3.1P
To determine
Identify the role of the taxes on necessities.
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Thoroughly analyze the impact of taxes on tobacco through the perspective of a smoker (a consumer in the tobacco market) worried about rising prices.
Focus on price elasticity in your answer.
How can the government improve tax collections without imposing much tax to the consumer?
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.
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Principles of Economics (12th Edition)
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- Explain the role of taxation in reducing excess demand?arrow_forwardAlcohol and tobacco are products that contribute the most to the feral government’s tax revenue. Use the concept of elasticity to explain why.arrow_forward22. If the government decide to increase taxes on sugar, who do you think will carry the burden of taxation? Please justify your answer and explain.arrow_forward
- In general, on which side of the market does a tax burden fall more heavily? on the side of the market that is perfectly elastic on the side of the market that is less elastic on the side of the market that is more elastic on the side of the market that is unit elasticarrow_forwardWhat determines whether the buyer or seller pays the bulk of the tax?arrow_forwardThe tax on cigarettes in New York City is one of the highest in the nation—$5.85 per pack. What are some of the secondary effects of this tax? Check all that apply.arrow_forward
- Describe the three distinct terms to describe the tax rates?arrow_forwardDo 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_forwardIn a country, a value-added tax (VAT) is applied at each stage of production. The nature of VAT allows for the ____________ of the tax burden along the supply chain, from producers to final consumers. A) Concentration B) Reduction C) Absorption D) Shiftingarrow_forward
- What are pros and cons to increasing the gasoline tax?arrow_forwardAs price elasticity of demand increases, the burden of a tax gets _______; as price elasticity of supply increases, the burden of a tax gets _________. (Here, you can read "bigger" as "heavier" and "smaller" as "lighter" if that helps.) bigger; bigger smaller; smaller bigger; smaller smaller; biggerarrow_forwardIdentify the link of necessity and luxury goods to tax revenuearrow_forward
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