The British government recently imposed a unit excise tax of about $154 per ticket on airline tickets for flights to or from London airports. In answering the following question, assume normally shaped demand and supply curves. Use an appropriate diagram to predict effects of the ticket tax on the market cleaning price of London airline tickets and on the equilibrium number of flights into and out of London. What do you predict is likely to happen to the equilibrium price of tickets for air flights in to and out of cities that are in close proximity to London but are not subject to the ne ticket tax? Explain your reasoning. Concept introduction: Equilibrium price: Equilibrium price is the price at which the quantity demanded and the quantity supplied are the same. Excise tax: The tax paid while purchasing a good or product is called the excise tax. Mostly this tax is included in the cost of the product.

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Chapter 6, Problem 7P

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The British government recently imposed a unit excise tax of about $154 per ticket on airline tickets for flights to or from London airports. In answering the following question, assume normally shaped demand and supply curves.

Use an appropriate diagram to predict effects of the ticket tax on the market cleaning price of London airline tickets and on the equilibrium number of flights into and out of London.

What do you predict is likely to happen to the equilibrium price of tickets for air flights in to and out of cities that are in close proximity to London but are not subject to the ne ticket tax? Explain your reasoning.

Concept introduction:

Equilibrium price: Equilibrium price is the price at which the quantity demanded and the quantity supplied are the same.

Excise tax: The tax paid while purchasing a good or product is called the excise tax. Mostly this tax is included in the cost of the product.

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