Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 8.2, Problem 2QQ
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How does a sugar tax that increases the final price of non-alcoholic beverages with sugar address the problem? Using the concept of price elasticity of demand, is a tax on non-alcoholic beverages with sugar the best way of addressing the problem?
Question 28
As part of a health program, a city imposes a tax on soda pop. We would expect consumers to pay almost all of this tax if demand is what?
a
inelastic and supply is inelastic
b
inelastic and supply is elastic
c
elastic and supply is elastic
d
elastic and supply is inelastic
Answer all four:Use the data below to answer the following questions:
Price
Quantity Supplied
$4
4
$7
13
Calculate the price elasticity of supply when the price rises from $4 to $7. Round your answer to the nearest hundredth.
Is the price elasticity of supply elastic or inelastic?
The government wants to increase production of this good. Would it make more sense to offer a subsidy or a tax?
Based on your previous answers, would the government plan to increase production be likely to be effective or ineffective? Explain your answer.
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Essentials of Economics (MindTap Course List)
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- Who would pay a tax imposed on the supplier when the price elasticity of supply is inelastic and the price elasticity of demand is elastic?arrow_forwardSuppose an economist estimates the price elasticity of demand for instant noodle is -2.4, while its price elasticity of supply is 4.0. If the government decides to impost a per-unit sales tax of $16 per pack of instant noodle, how would the market price for instant noodle be affected? Show your calculation.arrow_forwardA city government decides to tax hotel rooms to raise money. Before the tax, 1000 rooms were typically rented out per month. After the tax, the number of rooms rented per month falls to 900, the amount paid by hotel guests rises to $130 and the amount received by sellers falls to $110 per room. If the price per hotel room was $100 per night before the tax, which of the following can we conclude? The supply of hotel rooms is more price elastic than is the demand The demand for hotel rooms is more price elastic than is the supply The supply of hotel rooms after the tax is greater than the demand for hotel rooms The demand for hotel rooms after the tax is greater than the supply of hotel rooms We cannot conclude any of the options given with only the information provided.arrow_forward
- What happens when supply is more elastic than demand; and vice versa?arrow_forwardQuestion 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 Winearrow_forwardWhen supply curve is horizontal, elasticity of the supply would be ___________?arrow_forward
- I need some help understanding the elasticity of demand and supply. I need more resources that explain the basics and then move into more difficult concepts with economics. Thank you- Jamie Haysarrow_forwardIf the demand for American automobiles is more elastic in Europe than it is in the United States, we might expectarrow_forwardCorrectly illustrate the market (supply and demand curve). Make sure to correctly shade the area of the tax. a. Washington state has an rideshare market that shares rides at a price of P. At that price, Q miles of rides will be share in one week. Elasticity of supply: relatively inelastic Elasticity of demand: relatively elastic Suppose the Washington state were to levy an excise tax collected by producers.arrow_forward
- Is the price elasticity of demand or supply more elastic over a shorter or a longer period of time? Why?arrow_forwardIf the elasticity of supply is greater than one, the supply curve wouldbe____ what is the correct answer? Vertical Passing through the origin Touching y-axis Horizontalarrow_forwardThe figure below represents the market for Gasoline, where initially the equilibrium price was $5.60. The picture shows the effect of a $1.50 tax on gasoline. Using the information from the figure, what is the price elasticity of demand(Using the Midpoint method) when moving from equilibrium to the new demand after the tax?(Input the answer in absolute value and round it to 2 decimal places)arrow_forward
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