Microeconomics
Microeconomics
11th Edition
ISBN: 9781260507041
Author: Colander, David
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Chapter 7, Problem 10QE
To determine

Explain what would bear the larger share of the burden if the demand for cigarettes is inelastic and supply of cigarettes is elastic.

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Suppose that the supply of oil is elastic and demand for oil is inelastic. If the government taxes oil, who will bear most of the tax burden?
Suppose the supply curve for cars is more elastic than the demand curve for cars.  If the government imposes a tax on car sellers, which party (buyers or sellers) will bear more of the tax burden?  How will the tax burden change if the government imposed the tax on car buyers, rather than sellers?
Suppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.8 and 0.7 respectively.  Suppose the government imposes a per-unit tax of $45 on the cigarette sellers. By how much would buyers share the tax burden respectively? Show your calculation.
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