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 3.3P
To determine
Calculate the excess burden of tax and draw the graph of consumer’s responsiveness after the implementation of tax.
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Students have asked these similar questions
The demand for salt is price inelastic and the supply of salt is price elastic. The demand for caviar is price elastic and the supply of caviar is price inelastic. Suppose that a tax of $1 per kilogram is levied on the sellers of salt and a tax of $1 per kilogram is levied on the buyers of caviar. Who would we expect to have to pay most of these taxes?
Question 29Answer
a.
the sellers of salt and the sellers of caviar
b.
the buyers of salt and the buyers of caviar
c.
the sellers of salt and the buyers of caviar
d.
the buyers of salt and the sellers of caviar
Illustrate and explain using a diagram how to imposition of an excise tax on petrol at the time of purchase
A) affect the equilibrium price and quantity of petrol
B) how the cost of this tax is distributed between the buyers and sellers
C) illustrate and explain by using a diagram who will pay the cost of this petrol excise tax if demand for petrol is perfectly price inelastic.
Suppose the income elasticity of demand for food is 0.5 and the price elasticity of demand -1.0. Suppose also that your housemate Claire spends $10,000 per year on food, that the price of food is $4, and that her income is $50,000.
a) If a $4 sales tax on food were to cause the price of food to double, how much food would Claire’s consume?
b) Suppose she is given a state sales tax rebate of $5,000 to ease the effect of the tax. Now how much food would she eat?
c) Briefly discuss how you know whether she would be better or worse off when given a rebate to the sales tax payments?
Chapter 19 Solutions
Principles of Economics (12th Edition)
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