Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Question
Chapter 8, Problem 2MCQ
To determine
To identify:
The option that correctly states the situation and the people who will pay the tax levied on sugar.
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1. 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?
Question
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
Wine
Chapter 8 Solutions
Foundations of Economics (8th Edition)
Ch. 8 - Prob. 1SPPACh. 8 - Prob. 2SPPACh. 8 - Prob. 3SPPACh. 8 - Prob. 4SPPACh. 8 - Prob. 5SPPACh. 8 - Prob. 6SPPACh. 8 - Prob. 7SPPACh. 8 - Prob. 8SPPACh. 8 - Prob. 9SPPACh. 8 - Prob. 10SPPA
Ch. 8 - Prob. 1IAPACh. 8 - Prob. 2IAPACh. 8 - Prob. 3IAPACh. 8 - Prob. 4IAPACh. 8 - Prob. 5IAPACh. 8 - Prob. 6IAPACh. 8 - Prob. 7IAPACh. 8 - Prob. 8IAPACh. 8 - Prob. 9IAPACh. 8 - Prob. 10IAPACh. 8 - Prob. 1MCQCh. 8 - Prob. 2MCQCh. 8 - Prob. 3MCQCh. 8 - Prob. 4MCQCh. 8 - Prob. 5MCQCh. 8 - Prob. 6MCQCh. 8 - Prob. 7MCQCh. 8 - Prob. 8MCQ
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- In a market where the supply curve is perfectly inelastic how does an excise tax affect the price paid by consumers and the quantity bought and sold?arrow_forwardThe price of coffee rose sharply last month, while the quantity sold remained the same. Five people suggest various explanations: Leonard: Demand increased, but supply was perfectly inelastic. Sheldon: Demand increased, but it was perfectly inelastic. Penny: Demand increased, but supply decreased at the same time. Howard: Supply decreased, but demand was unit elastic. Raj: Supply decreased, but demand was perfectly inelastic. Who could possibly be right? Use graphs to explain your answer.arrow_forward1. 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_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_forwardA sales tax will be divided so that buyers pay the full amount if Select one: a. supply is perfectly inelastic. b. supply has unitary elasticity. c. demand is perfectly inelastic. d. demand has unitary elasticity.arrow_forwardTyped plz and Asap thanksarrow_forward
- The market for commodity Z was at equilibrim before tax at price Ksh. 50 per unit sold and the quantity was 5000 units. Suppose own price elasticity of demand is 0.6 and the elasticity of supply is 1.1 After the government announced tax measures the new market price increased to Ksh. 70 per unit. Calculate the equilibrium price and quntity after tax Calculate the seller and buyers burden, Explainarrow_forward4. In order to reduce farm output, raise farm prices, and thus raise farm incomes (revenues), the government pays farmers to set aside a portion of their land from production. Using a graph, explain in terms of the elasticity of demand for farm products why farmers may be better-off when harvests are low even if we ignore the money they receive from the set-aside program.arrow_forward1. How imposition of some tax on goods will affectlabor supplyarrow_forward
- Question 4 If the semi-elasticity between x and y is -2, what does it mean? A. When x decreases by 2%, y increases by 5% B. When x decreases by 1 unit, y increases by 2% C. When x decreases by 1%, y increases by 2 units OD. When x increases by 1%, y decreases by 2 units E. When x increases by 2%, y decreases by 4% OF. None of the options given are correctarrow_forwardThe demand and supply schedule for coffee are: a. If there is no tax on coffee, what is the price and how much coffee is consumed? b. What is the consumer surplus? Show your calculations. c. What is the price elasticity of demand when the price goes up from $4 to $5 dollars? Is the demand for coffee elastic or inelastic? Explain.arrow_forwardWhich of the following causes for an increase in the supply of a product? a. An increase in the rate of tax b. An increase in the cost of production c. An increase in subsidy d. A decrease in the number of sellersarrow_forward
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