Principles of Microeconomics
7th Edition
ISBN: 9781305156050
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 6, Problem 5QR
To determine
The impact of changing tax on consumers to sellers.
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The Indian government places a Rs. 1,000 tax on smart phones, will the price paid by consumers raise by more than Rs. 1,000, less than Rs. 1,000 or exactly Rs. 1,000? Explain.
In a country the Government determines to increase the tax on gasoline by $0.20 per gallon. The price of gasoline after taxes though only goes up by $0.15. Does this mean the gas station is not collecting the correct amount of taxes?
In the market for widgets, the supply curve is the typical upward-sloping straight line,
and the demand curve is the typical downward-sloping straight line. The equilibrium
quantity in the market for widgets is 200 per month when there is no tax. Then a tax of
$5 per widget is imposed. The price paid by buyers increases by $2 and the after-tax
price received by sellers falls by $3. The government is able to raise $750 per month in
revenue from the tax. The deadweight loss from the tax is
Chapter 6 Solutions
Principles of Microeconomics
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- The equilibrium price of a good is $13$13. Suppose the government introduces a tax on this good. In this case, the price paid by consumers is 1.51.5 times more than the equilibrium price, and the price received by producers is 1.31.3 times less than the equilibrium price. Calculate the amount of tax per good. Enter your answer in the box below and round to two decimal places if necessary.arrow_forwardAt the current market equilibrium, the price elasticity of supply for a certain good is much lower than the price elasticity of demand. if the government imposes a $5 specific tax on this good, who will bear more of the burden of the tax?arrow_forwardIf cigarettes and marijuana had been found to be substitutes, what would a tax placed on cigarettes do? decrease the demand for marijuana increase the demand for marijuana decrease the quantity demanded of marijuana increase the quantity demanded of marijuanaarrow_forward
- 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 caviararrow_forwardCongress and the president decide that the United States should reduce air pollution by reducing its use of gasoline. They impose a $ 0.50 tax for each gallon of gasoline sold. Should they impose this tax on producers or consumers? Explain carefully using a supply-and-demand diagram. If the demand for gasoline were more elastic, would this tax be more effective or less effective in reducing the quantity of gasoline consumed? Explain with both words and a diagram. Are consumers of gasoline helped or hurt by this tax? Why? Are workers in the oil industry helped or hurt by this tax ? Why ?arrow_forwardAnswer quick in 30 minutes....arrow_forward
- Effect of a tax on buyers and sellers The following graph shows the daily market for jeans. Suppose the government institutes a tax of $23.20 per pair. This places a wedge between the price buyers pay and the price sellers receive.arrow_forwardAccording to the article, after the city of Berkeley imposed a $0.01 per ounce tax on sugar-sweetened beverages (SSBs), by what percent did consumption of SSBs fall among Berkeley's low-income residents? Who was Berkeley's tax levied on in city law? Buyers or sellers? Assume that the price elasticity of supply for SSBs is elastic and the price elasticity of demand for SSBs is inelastic. What would be the outcome of the sales tax on sugary drinks if the law says that the tax is levied on sellers of the drinks? Who will pay the tax? Assume that the price elasticity of supply for SSBs is elastic and the price elasticity of demand for SSBs is inelastic. What would be the outcome of the sales tax on sugary drinks if the law says that the tax is levied on buyers of the drinks? Who will pay the tax? Explain why your answers to #3 and #4 are different or similar. What determines who pays the tax? What is your opinion of a tax on sugary drinks in your community? Would you be in favor or…arrow_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_forward
- During the Summer of 2022, gas prices rose well over $5.00 per gallon. In response, President Biden called for a 3-month Federal Gas Tax Holiday, which would remove the $0.18 per gallon federal tax on gasoline. Under what circumstances would you expect consumers to reap the majority of the benefits from the removal of the gasoline tax? Under what circumstances would you expect gasoline retailers to reap the majority of the benefits from the removal of the gasoline tax?arrow_forwardThe figure below represents the market for Gasoline, where initially the equilibrium price was $5.60. The picture shows the effect of a $1.50 tax on gasoline. Using the information from the figure, what is the price elasticity of demand(Using the Midpoint method) when moving from equilibrium to the new demand after the tax?(Input the answer in absolute value and round it to 2 decimal places)arrow_forwardThe demand for tomatoes is Q = 40-4P and the supply of tomatoes is Q = P +10. Answer the following questions. (a) Suppose that $1 per unit tax is levied on the consumers. Who bears the economic incidence of this tax? (b) Calculate the deadweight loss (c) Suppose that stores will pay $1 per unit tax directly. What will happen to the "sticker price" on tomatoes? How will the size of the consumer tax burden change? (d) Suppose that tax is increased to $2 per unit on the consumers. Calculate the deadweight loss. Compare the size of the deadweight loss with (b).arrow_forward
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