The impact of taxes on the elasticity of demand and supply.

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Answer 1

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Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 8, Problem 6CQQ

To determine

The impact of taxes on the elasticity of demand and supply.

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Microeconomics Question 1: True or False. Explain. a. When the demand curve of a good shift to the left, it becomes more inelastic at every level of price. b. If the tax burden falls entirely on buyers a good (tax in per unit imposed on seller), the demand of that good should be perfectly elastic. Question 2: Suppose the demand and supply for gasoline are given by =20-2P and Q -4+10 where P is the price in $ per gallon, and quantity is measured in millions of gallons per day a. Find the equilibrium price/quantity for this market b. How much is the price elasticity of demand and price elasticity of supply at this equilibrium? c. Suppose that the state government decides to tax $2/gallons on consumers. Find the new equilibrium prices and the new equilibrium quantity d. What is total tax payment in dollars to the state government? How much is the share of tax paid by consumers e Graph your results

If a policymaker wants to raise revenue by taxinggoods while minimizing the deadweight losses, heshould look for goods with _________ elasticities ofdemand and _________ elasticities of supply.a. small; smallb. small; largec. large; smalld. large; large

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.

Answer 2

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 8, Problem 6CQQ

To determine

The impact of taxes on the elasticity of demand and supply.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 3

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 8, Problem 6CQQ

To determine

The impact of taxes on the elasticity of demand and supply.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 8, Problem 6CQQ

To determine