To state:
The effect of demand of sunglasses and sunscreens on buyers and sellers when government doubles the tax from 5.5% to 11% in Florida.
Answer to Problem 1SPPA
When tax imposed by the government increases, consumer pay most of the tax. If goods are necessary like life-saving medicines buyers buy those products even the price doubles, but if goods are not much necessary the demand will decrease.
The tax increase decreases the quantity of sunglass and sunscreen bought by less than half. A new tax will raise the price of the products and demand will decrease.
Explanation of Solution
When a new tax is imposed on the prices of the goods, prices generally go high. In Florida, when the government doubles the tax; the buyers will pay the amount of the tax increased. The demand will go down. Sunglasses and sunscreens are not the very necessary things; hence, the demand will go down. They must pay extra money for sunglasses and sunscreens.
Perfectly
In perfectly elastic demand, consumers buy more things if the prices fall and when the prices go high the demand decreases.
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Chapter 8 Solutions
Foundations of Economics (8th Edition)
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