MICROECONOMICS
11th Edition
ISBN: 9781266686764
Author: Colander
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 8.W, Problem 4QE
(a)
To determine
The effects of an increase in supply according to the elasticity of
(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.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
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?
Chapter 8 Solutions
MICROECONOMICS
Ch. 8.1 - Prob. 1QCh. 8.1 - Prob. 2QCh. 8.1 - Prob. 3QCh. 8.1 - Prob. 4QCh. 8.1 - Prob. 5QCh. 8.1 - Prob. 6QCh. 8.1 - Prob. 7QCh. 8.1 - Prob. 8QCh. 8.1 - Prob. 9QCh. 8.1 - Prob. 10Q
Ch. 8.W - Prob. 1QECh. 8.W - Prob. 2QECh. 8.W - Prob. 3QECh. 8.W - Prob. 4QECh. 8.W - Prob. 5QECh. 8.W - Prob. 6QECh. 8.W - Prob. 7QECh. 8.W - Prob. 8QECh. 8.W - Prob. 9QECh. 8.W - Prob. 10QECh. 8.W - Prob. 11QECh. 8.W - Prob. 12QECh. 8.W - Prob. 13QECh. 8.W - Prob. 14QECh. 8.W - Prob. 1QAPCh. 8.W - Prob. 2QAPCh. 8.W - Prob. 3QAPCh. 8.W - Prob. 4QAPCh. 8.W - Prob. 5QAPCh. 8.W - Prob. 1IPCh. 8.W - Prob. 2IPCh. 8.W - Prob. 3IPCh. 8.W - Prob. 4IPCh. 8.W - Prob. 5IPCh. 8.W1 - Prob. 1QCh. 8.W1 - Prob. 2QCh. 8.W1 - Prob. 3QCh. 8.W1 - Prob. 4QCh. 8.W1 - Prob. 5QCh. 8.W1 - Prob. 6QCh. 8.W1 - Prob. 7QCh. 8.W1 - Prob. 8QCh. 8.W1 - Prob. 9QCh. 8.W1 - Prob. 10QCh. 8 - Prob. 1QECh. 8 - Prob. 2QECh. 8 - How would an economist likely respond to the...Ch. 8 - Prob. 4QECh. 8 - Prob. 5QECh. 8 - Prob. 6QECh. 8 - Prob. 7QECh. 8 - Prob. 8QECh. 8 - Prob. 9QECh. 8 - Prob. 10QECh. 8 - Prob. 11QECh. 8 - Prob. 12QECh. 8 - Prob. 13QECh. 8 - Prob. 14QECh. 8 - Prob. 15QECh. 8 - Prob. 16QECh. 8 - Prob. 17QECh. 8 - Prob. 18QECh. 8 - Prob. 19QECh. 8 - Prob. 20QECh. 8 - Prob. 21QECh. 8 - Prob. 22QECh. 8 - Prob. 23QECh. 8 - Prob. 24QECh. 8 - Prob. 1QAPCh. 8 - Prob. 2QAPCh. 8 - Prob. 3QAPCh. 8 - Prob. 4QAPCh. 8 - Prob. 5QAPCh. 8 - Prob. 1IPCh. 8 - Prob. 2IPCh. 8 - Prob. 3IPCh. 8 - Prob. 4IPCh. 8 - Prob. 5IPCh. 8 - Prob. 6IPCh. 8 - Prob. 7IPCh. 8 - Prob. 8IPCh. 8 - Prob. 9IPCh. 8 - Prob. 10IP
Knowledge Booster
Similar questions
- Consider the market for Widgets. Suppose that the equation for the supply curve is: Qs = 1,000P – 10,000, and the equation for the demand curve is: Qd = 50,000 – 2,000P. It turns out that the equilibrium price is 20, while the equilibrium quantity is 10,000. a. Use a 10% increase in quantity to estimate (crudely) both the elasticity of supply and the elasticity of demand at the equilibrium quantity. i) Categorize supply and demand as elastic or inelastic at the equilibrium quantity. ii) Is supply or demand relatively more inelastic at the equilibrium quantity? b. If the government enacted a tax of $3, the loss in consumer surplus would be 9,000, while the loss in producer surplus would be 18,000 (see Homework 2, question #2.) Compare this information to your answer to part (a). Explain. c. Now estimate (crudely) the elasticity of demand at a quantity of 11,000 by decreasing quantity by 1,000. Compare your estimate of elasticity to the estimate in part (a). Comment. 2. Suppose the…arrow_forwardThe Department of Agriculture is interested in analyzing the domestic market for corn. The DA's staff economists estimate the following equations for the demand and supply curves: Qd = 1,600 - 125P Qs = 440 + 165P Quantities are measured in millions of bushels; prices are measured in dollars per bushel. a. Calculate the price elasticities of supply and demand at the equilibrium values. Is demand elastic, inelastic or unit elastic and why? Is supply elastic, inelastic or unit elastic and why? b. The government currently has a $4.50 bushel support price in place. What impact (surplus or shortage) will this support price have on the market? If the government is currently implementing a program that requires it to buy up any surpluses, how much wheat will the government buy?arrow_forward1. Suppose the demand for towels and supply of towels are given by the below: QD = 100 - 4P QS = P a. Find the equilibrium price and quantity using demand and supply functions above. b. Plot demand and supply curve on the same graph and point out the equilibrium quantity and price. You should draw each graph precisely with intercepts and slopes. c. Solve for the price elasticities of demand and supply at the equilibrium point. Which is more elastic: demand or supply? Simply explain why. d. Suppose there was a demand shock so that at each price 20 more towels are demanded since consumers want more. Plot the new demand curve on the graph that you derive in part (a). Find the new equilibrium price and quantity. (Hint: You may derive a new demand function by adding a constant to find a new equilibrium price and quantity.)arrow_forward
- a. If price elasticity of demand is -1.3 and price increases by 2 percent, quantity demanded (increases/decreases) by (< 2 percent> 2 percent−2 percent.) b. If price elasticity of demand is -0.3 and price decreases by 2 percent, quantity demanded will (decreases/increases) by (< 2 percent−2 percent> 2 percent.) c. If price elasticity of demand is -1.3 and price increases by 2 percent, quantity demanded will (increases/decreases) by (> 2 percent−2 percent< 2 percent.) d. If price elasticity of demand is -0.3 and price decreases by 2 percent, quantity demanded will (increases/decreases) by (< 2 percent−2 percent> 2 percent.)arrow_forwardThe short-run demand and supply elasticities for oil are -0.076 and 0.088, respectively. The current price per barrel is $30 and the short-run equilibrium quantity is 23.84 million barrels per year. 1. Derive the linear demand and supply equations.2. What will be the effects on the market price and quantity if the government decides to purchase (and store away) an additional 2 million barrels of oil? Assume that the additional consumption of oil by the government results in a parallel shift of the supply curve to the left by 2 million barrels per day.3. What could be the economic rationale for buying and storing oil?arrow_forwardConsider public policy aimed at smoking. a. Studies indicate that the price elasticity of demand for cigarettes is about 0.4. If a pack of cigarettes currently costs $2 and the government wants to reduce smoking by 20 percent, by how much should it increase the price? b. If the government permanently increases the price of cigarettes, will the policy have a larger effect on smoking one year from now or five years from now? c. Studies also find that teenagers have a higher price elasticity than do adults. Why might this be true?arrow_forward
- Why have gasoline prices risen faster over the past year, especially in Canada, and what is a policy government could use to lower gasoline prices? use know about supply, and demand curve, and also elasticity to explain in your words. 500 words, please.arrow_forward"If the government wishes to tax certain goods, it should tax goods that have inelastic rather than elastic demand". What is the rationale for this statement?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
- 2. PLEASE JUST ANSWER WITH THE ANSWER WITH AN EXPLANATION. When a significant percentage change in the price results in a small percentage change in the requested quantity of a good, we will say that the demand is: a) inelastic. B) none of these answers. c) with unit elasticity. d) elastic. 3. Which of the following statements is a good way to distinguish a rarity from a shortage A) none of these answers: a rarity and a shortage are essentially the Same thing. b) A rarity cannot be eliminated while a shortage can be eliminated In this case by an increase in the price c) a shortage results from price control, while a rarity results from the fact that sellers prevent a certain amount of the product from being transported to the market •D) a shortage means that you can't have everything you want at a zero price; a rarity means that you can't have everything you want at any price.arrow_forward1. A change in quantity supplied by 5 units, price changes by? 2. The equilibrium price and equilibrium quantity are valued at? 3. Using the information on the demand function, if price increases from P10 to P15, demand for good X is considered to be _________ and the price elasticity coefficient is valued at; the price elasticity of supply coefficient is ________ at the price range of P10 and P15, and the type of elasticity is ____________.?arrow_forwardIf the government eliminates a tax on a good with a perfectly elastic supply, who benefits most? A) sellers B) buyers and sellers benefit equally. C) buyers if the demand is unit elastic, otherwise sellers D) buyersarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Microeconomics: Principles & PolicyEconomicsISBN:9781337794992Author:William J. Baumol, Alan S. Blinder, John L. SolowPublisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Microeconomics: Principles & Policy
Economics
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:Cengage Learning