Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Videos
Question
Chapter 8, Problem 9SPPA
To determine
To state:
Comments on the incidence of tax on sugary drinks and the interpretation about the elasticities and
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
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
33
Q15
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
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- The 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_forwardIn 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_forwardDon't use Ai and chatgpt. Answer in step by step with explanation.arrow_forward
- Suppose that the long-run price elasticity of demand for gasoline is 0.55. Assume that the price of gasoline is currently $4.00 per gallon, the quantity of gasoline is 140 billion gallons per year, and the federal government decides to increase the excise tax on gasoline by $1.00 per gallon. Suppose that in the long run the price of gasoline increases by $0.70 per gallon after the $1.00 excise tax is imposed. a. Using the midpoint formula, after the tax is imposed, the new quantity of gasoline demanded is year. (Enter your response rounded to two decimal places.) billion gallons perarrow_forwardEconomists have made estimates of the price elasticity of demand for a variety of goods and services. i. What is price elasticity of demand and why is it important to estimate it? Provide your own examples to support your answer. ii. The government commissioned a research firm, Super Consulting, to conduct a study on the market demand for cigarettes. The firm reported that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes costs $2 and the government wants to reduce smoking by 20 percent, by how much should the price increase using the midpoint method?arrow_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_forward
- 6. Effect of a tax on buyers and sellers The following graph shows the weekly market for handbags in some hypothetical economy. Suppose the government levies a tax of $11.60 per bag. The tax places a wedge between the price buyers pay and the price sellers receive. 45 40 10 S Tax Wedge Demand Supply 30 40 50 60 70 80 100 QUANTITY (Bags of handbags) Complete the following table by filling in the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity (Bags of handbags) Price Buyers Pay (Dollars per bag) Price Sellers Receive (Dollars per bag) Before Tax After Tax Using your answers from the previous table, calculate the tax burden that falls on buyers and on sellers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table. Buyers Sellers Tax Burden (Dollars per bag) Elasticity The tax burden falls more heavily on the side of the market…arrow_forwardSuppose that the long-run price elasticity of demand for gasoline is -0.45. Assume that the price of gasoline is currently $4.00 per gallon, the quantity of gasoline is 140 billion gallons per year, and the federal government decides to increase the excise tax on gasoline by $1.00 per gallon. Suppose that in the long run the price of gasoline increases by $0.70 per gallon after the $1.00 excise tax is imposed. a. Using the midpoint formula, after the tax is imposed, the new quantity of gasoline demanded is billion gallons per year. (Enter your response rounded to two decimal places.)arrow_forwardplease help! i cant tell a difference between z and y, and x and w.arrow_forward
- 6. The government decides to place a $6 unit tax on a product. The following elasticities are known: E, = - 1; E,= 2. By how much does the price paid by the demanders increase because of this tax?arrow_forward5. Consider the following is the demand and supply for basketballs in Germany. Demand 700 600 500 400 300 200 100 Supply 0 0 100 200 300 400 500 Price (€) 2.00 2.50 3.00 3.50 4.00 4.50 5.00 a. Sketch the demand and supply curves. What would be the equilibrium price and quantity? b. Suppose the government imposes a €0.5 tax per basketball on the producers. Find the new equilib- rium price and quantity. Add the new supply curve to your graph. c. Now, assume the government changes the tax by switching it from the producer to the consumer. What will be the new equilibrium price and quantity? Add the new demand curve to your graph from part (b).arrow_forwardThe government wants to stop obesity in children, so they decide to tax soda producers for each unit of soda sold. If demand for soda is relatively elastic, and supply is relatively inelastic will suppliers or consumers pay a larger share of the tax? Briefly explain why.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Principles of MicroeconomicsEconomicsISBN:9781305156050Author:N. Gregory MankiwPublisher:Cengage Learning
Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning
Microeconomics: Principles & PolicyEconomicsISBN:9781337794992Author:William J. Baumol, Alan S. Blinder, John L. SolowPublisher:Cengage Learning
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Principles of Microeconomics
Economics
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Microeconomics: Principles & Policy
Economics
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:Cengage Learning
Environmental Law: The Clean Air Act; Author: LawShelf;https://www.youtube.com/watch?v=1-SH3kJpVA4;License: Standard Youtube License