Microeconomics
Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
Question
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Chapter 8.W, Problem 4QE

(a)

To determine

The effects of an increase in supply according to the elasticity of supply and demand.

(b)

To determine

The effect of a government guarantee of the price in each case explained in Part (a).

(c)

To determine

The most preferable combination among the four.

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options for blank one drop down: 1 OR 2 OR 5 options for blank twodrop down: 1 OR 2 OR 5 options for blank threedrop down: 0  OR 1 OR 2 OR 3 OR 4 OR 5 options for blank four no drop down  options for blank five drop down: Supply OR demand OR either  options for blank six drop down: supply id more elastic than demand OR demand is smore elastic then supply OR its not related to elasticity
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
a) What is the Equilibrium Price and Equilibrium Quantity b) If the government imposes a $15 per unit tax on sellers on this good what is the new quantity sold in units, how much will the buyers pay, how much will sellers receive?, and how much will the government receive in tax revenue?  c) What is the price elasticity of demand and over this price change? What about the supply? d) Based on the elasticities calculated above, who will bear a greater burden from the tax? Why?

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