Principles of Microeconomics
7th Edition
ISBN: 9781305156050
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 6, Problem 6CQQ
To determine
When the impact of tax is mainly on consumers.
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When a good is taxed, the burden of the tax fallsmainly on consumers ifa. the tax is levied on consumers.b. the tax is levied on producers.c. supply is inelastic and demand is elastic.d. supply is elastic and demand is inelastic
I want the answer
Suppose that the Australian government imposes a sales tax on a product and both buyers and sellers share the burden of the If the price elasticity of demand for the product is perfectly inelastic. Which of the following is true?
Select one:
a. Sellers would pay more of the tax than buyers.
b. Buyers would pay all of the tax.
c. Buyers and sellers would share the tax burden equally.
d. Sellers would pay all the tax.
Chapter 6 Solutions
Principles of Microeconomics
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- 1. An example of a market where supply and demand are both inelastic. 2. An example of a market where both supply and demand are both elastic. 3. An example of a market where supply is inelastic and demand is elastic. 4. An example of a market where supply is elastic and deman is inelastic.arrow_forwardQuestion You are in the business of producing and selling popcorn, cheese, crackers, and wine. The government plans to impose a tax on one of these products. Based on the elasticities in the table provided, as a profit-minded business person, which good would you (the business owner) most prefer to have taxed? Price elasticity Price elasticity of supply of demand Popcorn 1.2 2.0 Cheese 2.2 1.1 Crackers 1.6 1.3 Wine 1.7 1.8 Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Cheese b. Crackers Рорсоrn Winearrow_forwardWhich of the following statements about the relationship between elasticity and tax incidence are true ? Choose one or more:A. A tax on a good for which both demand and supply are relatively inelastic will cause a relatively large transfer of welfare from consumers and producers to the government. B.The incidence of a tax depends on who the tax is placed on. C.If a tax is imposed on a good with a perfectly inelastic demand, then consumers bear the full incidence of the tax. D.When demand is more inelastic than supply, producers bear more of the incidence of a tax. E.When demand is more inelastic than supply, consumers bear more of the incidence of a tax.arrow_forward
- Q28 NOT GRADED THIS IS A PRACTICE REVIEWarrow_forward1. What is the relationship between total revenue and own-price elasticity of demand? 2. Illustrate a situation when the producer of a good will have a greater tax incidence than a consumer.What does elasticity have to do with tax incidence?arrow_forward1.The supply of meat is more elastic in the long run than in the short run. Ceteris paribus, as time goes by, the burden of a tax on cattle will be increasingly passed on to the: Group of answer choices Grocer Government Rancher Consumerarrow_forward
- 14 K You are a policy maker who is interested in increasing tax revenues in order to reduce the Federal budget deficit. One proposal that has been suggested is increase excise taxes on certain goods. Some of the options suggested are: • vacation travel such as cruises • liquor and cigarettes • gasoline . theater and concert tickets Based on your knowledge of elasticity of demand, which items would you choose? Explain.arrow_forwardWhen supply is perfectly elastic, who bears the burden of tax? Select one: a. producers b. consumers c. producers and consumers d. sellersarrow_forwardQ Sea Aplia Homework: Elasticity of Demand and Supply The following graph shows the daily market for jeans when the tax on sellers is set at $0 per pair. Suppose the government institutes a tax of $5.80 per pair, to be paid by the seller. (Hint: To see the impact of the tax, enter the value of the tax in the Tax on Sellers field and move the green line to the after-tax equilibrium by adjusting the value in the Quantity field. Then, enter zero in the Tax on Sellers field. You should see a tax wedge between the price buyers pay and the price sellers receive.) Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool 50 Market for Jeans 45 I Quantity (Pairs of jeans) 50 40 Supply Demand Price (Dollars per pair) Supply Price (Dollars per pair) 75.00 17.00 35 30 25 Supply…arrow_forward
- 6. The government decides to place a $6 unit tax on a product. The following elasticities are known: E, = - 1; E,= 2. By how much does the price paid by the demanders increase because of this tax?arrow_forwardThe 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_forwardCalculate, interpret and try to explain where applicable in each question, why the elasticities of demand for the following examples occur: a. The government announced an introduction of excise tax from R1 to R1.50 per bottle of beer. This increase results in an overall price increase from R9 to R10.50 per bottle to consumers. The expected tax revenue from this will be R30,000. Before the tax hike, 28,000 beers were sold. b. What will happen to the total revenue of soft drink companies if the elasticity of demand for soft drinks is higher than 1 and the price of soft drinks decreases? c. The quantity demanded of a popular magazine decreases from 10,000 copies to 6,000 per month after the publisher increased the price of a copy from R25 to R40. Total revenue from sales of a prescribed textbook on economics increased from R50,000 to R60,000 when the price of the book increased from R400 to R600 per book. Explain why.arrow_forward
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