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 3.2P
To determine
Calculate the collection of the total tax and the value of the excess burden.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Consumers of gasoline in (Manhattan) New York are known to have an elastic demand to price of gasoline, whereas those in (Los Angeles) California are inelastic in their demand to gasoline prices. Explain and analyze the effects of a gasoline tax imposed in these two states (of equal dollar-value) by answering the following questions:
(a) Graphically represent the above scenario in each state, one graph representing the gasoline market in each state. On each graph clearly show:
(i) Both the axes
(ii) Supply and Demand schedules
(iii) The shift in the relevant schedule as a result of the tax
(iv) The area denoting the revenue given to the government by the consumers and the producers
(v) The Deadweight loss
The demand and supply equations for a product are:
Qd = 300 - 6P and Qs = -40 + 6P.
Determine the market equilibrium and draw graphs.
Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumer pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graphs and explain.
Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producers surplus and dead weight loss.
Consider the following market supply and demand information for cigarettes:
Price ($) Demand for Cigarettes (in million packs per week)
$2 12
3 10
4 8
5 6
6 4
7 2
and the supply is 8,000,000 cigarette packs per week.
Now suppose that the government mandates a $1 excise tax per pack on the buyers of cigarettes.
Who bears the economic incidence (tax burden) of the excise tax?…
Chapter 19 Solutions
Principles of Economics (12th Edition)
Knowledge Booster
Similar questions
- Suppose the demand for a product is given by P = 50 –Q. Also, the supply is given by P = 10 + 3Q. If a $12 per-unit excise tax is levied on the buyers of a good, after the tax, the total amount of tax paid by the producers is: None of these $84 $18 $63 $21arrow_forwardThe demand and supply equations for a product are: Q= 300 — 6P and Q.= -40 + 6P. Determine the market equilibrium and draw graphs. Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumers pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graphs and Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producer surplus, and deadweight loss.arrow_forwardDaily demand for gasoline at a Gas Station is described by Q = 980 - 300p, where Q are gallons of gasoline sold and p is the price in dollars. Gas Station's supply is Q = -2,980 + 3,000p. Suppose the state government places a tax of 18 cents on every gallon of gasoline sold. (a) What are the before-tax and after-tax equilibrium quantities of gasoline Q? (b) What are the changes in consumer's and producer's surplus due to tax? (c) What is the deadweight loss resulting from this tax?arrow_forward
- If the demand for automobiles is price elastic and an excise tax is levied on sellers of automobiles that causes a 10% increase in the price of automobiles paid by buyers, then: The quantity demanded of automobiles will decrease by more than 10% and buyers will bear a proportionally larger share of the direct burden of the tax than sellers. The quantity demanded of automobiles will decrease by more than 10% and sellers will bear a proportionally larger share of the direct burden of the tax than buyers. The quantity demanded of automobiles will decrease by less than10% and total revenues from auto sales will increase. The quantity demanded of automobiles will decrease by less than 10% and total revenues from auto sales will decrease.arrow_forwardThe demand and supply functions for product M are P = 83.6 - 0.037 Q P = 15.7 + 0.056 Q. A P10 tax per units is levied to the producer. Question: What is the P received by the seller after the imposition of tax? and how much will be the tax burden on the part of the producer after the imposition of tax? How much will be the tax burden in the part of buyer on the other hand?arrow_forwardSuppose 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 on the cigarette sellers. By how much would buyers share the tax burden respectively? Show your calculation.arrow_forward
- 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 calculationarrow_forwardThe tax-inclusive price of a carton of cigarettes in Canada is $100 per carton. Per capita consumption is 10 cartons. Federal and provincial taxes are currently $50 per carton. Suppose the two levels of government wish to increase the cigarette tax by 20 percent. If the price elasticity of demand is -0.25, what is the additional per capita tax revenue that the two levels of government can expect to collect?arrow_forwardA state tax on portable electronic devices causes sales of a single model of a handheld calculator to decrease from 80 to 70 per week. The tax is assessed as a tax on sellers when they receive the units from suppliers. Drag the appropriate curves (including the Quantity curve) to show the effects on the market. To refer to the graphing tutorial for this question type, please click here. Price (S) 100 100 Quant 140 130 120 110 100 GO 80 80 70 00 00 40 30 20 10 80 Quantity (per week) What tax revenue will the state collect from sales of this one model of calculator through the new tax? The tax revenue is $ per week.arrow_forward
- Given the following information QD = 240 – 5P QS = P Where QD is the quantity demanded, Qs is the quantity supplied and P is the price Suppose that the government decides to impose a tax of $12 per unit on sellers in this market. Determine the total surplus after tax Question 2 The government in your country is considering three programs that affect the market for cigarettes. Program 1: Media campaigns and labelling requirements aimed at making the public aware of the dangers of cigarette smoking Program 2: A price-support program for tobacco farmers Program 3: A cap on the number of cases of cigarettes sold per quarter at 20,000 cases. Determine the impact of on the market for cigarettes if Program 1 is implemented: Impact on supply – Impact on price – Impact on quantity – Impact on demand –arrow_forwardWhen the price is 10 TL for each pack of cookies, the supply is 250 thousand and the demand is 120 thousand boxes.When the price is 9,5 TL for each pack of cookies, the supply is 200 thousand and the demand is 240 thousand boxes. Since the price-demand and supply-demand equations are linear; If a tax is applied to the consumer at the rate of T=0.75 TL per product, find and interpret the market balance point after tax.arrow_forwardFill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity Price Buyers Pay Price Sellers Receive (Bottles of wine) (Dollars per bottle) (Dollars per bottle) Before Tax After Tax Using the data you entered in the previous table, calculate the tax burden that falls on buyers and on sellers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table. Tax Burden Elasticity (Dollars per bottle) Buyers Sellers The burden of the tax falls more heavily on the __elastic side of the market.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: 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