Microeconomics
10th Edition
ISBN: 9781259655500
Author: David C Colander
Publisher: McGraw-Hill Education
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Question
Chapter 4, Problem 12QE
To determine
Explain the changes in the sales volume during the weeks when states suspend taxes on retailers using the
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You are chairperson of a state tax commission responsible for establishing a program to raise new revenue through excise taxes. Why would elasticity of demand be important to you in determining the products on which the taxes should be levied?
Gasoline & Politics In the spring of 2008, Senators John McCain and Hillary Clinton (who were then running for president) proposed a temporary elimination of the federal gasoline tax, effective only during the summer of 2008, in order to help consumers deal with high gasoline prices.
Assume that during the summer, when gasoline demand is high because of vacation driving, gasoline refiners are operating at full capacity. What does this assumption suggest about the price elasticity of supply?
In light of your answer to the previous question, whom do you predict would benefit from the temporary gas tax holiday?
Price elasticity of demand estimates come up often when taxes are being placed on goods. Why do you think knowing the price elasticity of demand is important for policy? Despite large taxes on cigarettes (and the predicted decrease in consumption), the tobacco industry has seen steadily rising profits. What can explain this? What do you think would happen to the price elasticity of demand as e-cigarettes become more popular and available?
Chapter 4 Solutions
Microeconomics
Ch. 4.1 - Prob. 1QCh. 4.1 - Prob. 2QCh. 4.1 - Prob. 3QCh. 4.1 - Prob. 4QCh. 4.1 - Prob. 5QCh. 4.1 - Prob. 6QCh. 4.1 - Prob. 7QCh. 4.1 - Prob. 8QCh. 4.1 - Prob. 9QCh. 4.1 - Prob. 10Q
Ch. 4 - Prob. 1QECh. 4 - Prob. 2QECh. 4 - Prob. 3QECh. 4 - Prob. 4QECh. 4 - Prob. 5QECh. 4 - Prob. 6QECh. 4 - Prob. 7QECh. 4 - Prob. 8QECh. 4 - Prob. 9QECh. 4 - Prob. 10QECh. 4 - Prob. 11QECh. 4 - Prob. 12QECh. 4 - Prob. 13QECh. 4 - Prob. 14QECh. 4 - Prob. 15QECh. 4 - Prob. 16QECh. 4 - Prob. 17QECh. 4 - Prob. 18QECh. 4 - Prob. 19QECh. 4 - Prob. 20QECh. 4 - Prob. 21QECh. 4 - Prob. 22QECh. 4 - Prob. 23QECh. 4 - Prob. 24QECh. 4 - Prob. 1QAPCh. 4 - Prob. 2QAPCh. 4 - Prob. 3QAPCh. 4 - Prob. 4QAPCh. 4 - Prob. 5QAPCh. 4 - Prob. 6QAPCh. 4 - Prob. 1IPCh. 4 - Prob. 2IPCh. 4 - Prob. 3IPCh. 4 - Prob. 4IPCh. 4 - Prob. 5IP
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- I need the answer as soon as possiblearrow_forwardSuppose an economist estimates the price elasticity of demand for instant noodle is -2.4, while its price elasticity of supply is 4.0. If the government decides to impost a per-unit sales tax of $16 per pack of instant noodle, how would the market price for instant noodle be affected? Show your calculation.arrow_forwardSuppose at a price of $10 quantity demanded is 100 and when price is $11 quantity demanded is 85. What is the price elasticity of demand? Show all your work. Interpret this number completely.arrow_forward
- The demand of world crude oil is described as P=200-1.2Q where P is in $ per barrel and Q is in millions of barrels per day. Recent Ukraine-Russia war pushed the oil price from $90 to $130 a barrel. Please calculate the before and after price elasticities of demand and explain the implications of the change in price elasticity of demand.arrow_forwardCan you please help me out with this answer?arrow_forwardExplain why it is so important for a business owner to understand the concept of price elasticity of demand when pricing their goods and services.arrow_forward
- In general, in order for a price increase to cause a decrease in total revenue, demand must bearrow_forwardSuppose the price elasticity of demand for farm products is elastic. If federal government wants to follow a policy of increasing income for farmers, what type of programs will the government enact?arrow_forwardAt a price of $25,000, producers of midsized automobiles are willing to manufacture and sell 75,000 cars per month. At a price of $35,000, they are willing to produce and sell 125,000 a month. Using the same type of calculation method used to compute the price elasticity of demand, what is the price elasticity of supply? Is supply elastic, unit-elastic, or inelastic?arrow_forward
- In the last six months, the price of fuel for cars has increased very substantially in many countries. Explain why we might expect demand to be more price elastic in the long-run than in the short-run.arrow_forwardBelow is a graph for the market for product X for a specified time period. Calculate the price elasticity of demand for good X between points E and B. Calculate the price elasticity of demand for good X between points E and B. What type of elasticity is calculated (elastic, inelastic, or unitary)? What does this type of elasticity indicate for product X demand?arrow_forwardSuppose beef is selling at $40/cwt at the farm level and the farm-price elasticity of demand is -0.40. What would be the market-clearing price of beef if there was suddenly a 2 percent increase in beef supply? (Hint: Assume supply is perfectly inelastic and shifts rightward by 2 percent). Please provide chart or graph.arrow_forward
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