Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 6, Problem 6PA
To determine
The impact of $500 tax on luxury cars.
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Chapter 6 Solutions
Essentials of Economics (MindTap Course List)
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- Who would pay a tax imposed on the supplier when the price elasticity of supply is inelastic and the price elasticity of demand is elastic?arrow_forwardUse the concept of Price Elasticity of Demand to explain why the public policy recommendation of raising taxes on cigarettes causes State revenues to rise while also effectively deterring smoking among young people. Be sure to consider availability of substitutes and the effect of the percentage spent of each buyer’s budget when formulating a response. Who bears the brunt of the tax – the consumer or the producer? Are there any potential negative side effects of increasing taxes on cigarettes?arrow_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_forward
- How does a sugar tax that increases the final price of non-alcoholic beverages with sugar address the problem? Using the concept of price elasticity of demand, is a tax on non-alcoholic beverages with sugar the best way of addressing the problem?arrow_forwardHOW DO YOU RESPOND TO PRICE ELASTICITY? People have unlimited needs and wants for their personal satisfaction and because of that the prices of products easily get changed. Everyone is affected with the new normal in the market. The prices of products have become very expensive since the outbreak of the pandemic, not only in our locality, but in the whole world. If your income or the income of your family is not enough to purchase the basic commodities needed by your family, what goods would you buy, instead? What economic or marketing strategies would you apply? How would you respond to the price changes of these commodities?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
- What would it mean if the elasticity of demand for a good was zero? Explain whether it can be possible for the price elasticity of demand for a good to be zero, at least over some range of prices. Can the elasticity of demand be zero for all possible prices? Explain how or why not.arrow_forwardThe price elasticity of demand is -3, the price elasticity of supply is 1. The government imposes a per-unit tax of 80 Cents on the sale of a cup of coffee in paper cups. Compute how much of the 80 Cents per cup is actually borne by the consumer and how much is borne by the seller.arrow_forward"If the government wishes to tax certain goods, it should tax goods that have inelastic rather than elastic demand". What is the rationale for this statement?arrow_forward
- The current price for a good is $20, and 90 units are demanded at that price. The price elasticity of demand for the good is - 2. When the price of the good drops by 5 percent to $19, consumer surplus increases by $. (Enter your response to the nearest penny.)arrow_forwardThe current price for a good is $20, and 90 units are demanded at that price. The price elasticity of demand for the good is - 2. (Enter your response to the nearest penny.) When the price of the good drops by 10 percent to $18, consumer surplus increases by $arrow_forwardSuppose the price elasticity of demand for cigarettes is -0.7 and that the government can essentially set the price of cigarettes by altering the tax rate. If the government wishes to reduce the quantity of cigarettes demanded by 20 percent, how much must it raise the price of cigarettes? The government, to achieve its goal, must raise the price of cigarettes by percent. (Enter your response rounded to two decimal places)arrow_forward
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