5. Consider the utility function u(x, y) = 2 In x + 4y. Suppose that initially, p, = 1, py = 2, and I = 2. Now government imposes a 100% tax on Py. What is the substitution effect on x? а. -1 b. 1 c. 0 d. Uncertain
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- Suppose the market demand for milk is Qd = 40 – 4P Where Qd is millions of gallons demanded and P is price per gallon. Suppose the market supply for milk is Qs = - 40/3 + 20/3P Suppose demand for milk is relative elastic and demand for gasoline is relatively inelastic. Holding all else constant, A.taxing milk will generate lower deadweight losses than the same tax on gasoline. B.taxing milk will generate the same deadweight losses relative the same tax on gasoline. C.taxing milk will generate greater deadweight losses than the same tax on gasoline.Suppose the demand for cigarettes is Q = 15 - 0.5Pand the supply of cigarettes is Q = P - 3, where P is the price per pack of cigarettes. Suppose the government imposes a cigarette tax of $3 per pack. (a) What is the price paid by producers and price faced by consumers? (b) What is the government revenue from the tax and What is the total dollar amount of tax revenue that is ultimately paid by consumers (i.e. consumers' tax burden)? (c) What is the excess burden of the tax?Tax incidence.Given:Demand (D): P = 100 – 1.5 Q Q* = 40 P*=40Supply (S): P = 20 + 0.5 Qa. Suppose a specific tax of P10 per unit is imposed on producers.i. What is the new supply function?ii. Solve for the new equilibrium quantity and price after the tax is imposed.b. How much will the consumer pay for the good (price)?c. How much will the producer sell for this good (price)?d. What is the amount of total tax revenues?e. Who bears the burden of tax? Why?f. Calculate the elasticity of demand and supply to validate your answer in letter e. Discuss youranswers.
- Consider a product that is fixed on supply QS=4 and the demand for the product is givenby QD= 10-2P. The government imposes a unit tax of 2 TL per kg on the consumer.a) What is the price paid by consumer and producers before the tax and after the tax?b) Find the total tax burden, burden on consumers and burden on producers.c) Suppose that supply schedule is changed to QS= 4+P. Redo the above questions and compare the results thanks in advanceSuppose a firm has demand and supply are given by: Qd = 17− 2Px and Q s = 4Px − 1 c. How much tax revenue does the government earn with the $12 tax when the new equilibrium quantity is 2 units after tax .Consider an ad-valorem tax on a good X. The Demand for good X is constant elasticity with elasticity -2. The Supply for good Y is constant elasticity with elasticity 3. What is the incidence of the tax? Provide a fraction that shows the ratio of the tax burden that falls on the supply side relative to the demand side.
- Consider the demand and supply for strawberries to be given by Qd= 10-0.33P and Qs=-6+P and the government imposes per unit tax of $T, such that the total government revenue of $32 is generated at a new equilibrium price of $18. What is the amount of per unit tax in this case? OPTIONS: (i) $8 (ii) $1.77 (iii) $10 (iv) $12Assume that the Demand Function is P = 16250 - 6Q and Supply Function is P = 2000 + 3Q, a tax of P1200.00 is imposed by the government to the producers. (Graph items 1-5) 1. Whatis the Ps? 2. Whatis the Pb? 3. Compute for the DWL. 4. How much taxc is paid by the Suppliers? 5.How much tax is paid by the consumers?The market demand for steel is QD = 240–6P and the market supply for steel is QS= –60 +4P. Government imposes a $10 tax per unit of steel bought by the consumer. a) Who bears the economic incidence of this tax?b) Why does one side take more burden of tax than the other side?c) Calculate the deadweight loss of a $10 tax per unit levied on consumers of steel.
- In the absence of taxation a consumer has the budget constraint p1x1 + p2x2 - w = 0. Show that an ad valorem tax levied at rate t on both commodities and on labor raises no revenue. Explain this fact.(Answer the f) Its is known that the demand function for a product is P = 24 - 1/2Q and the supply function Q = 4 + 2P. If the government then increases the seller's tax on the product amount of IDR 20/ unit of goods, what is the price and quantity of goods new balance Calculate the tax burden borne by consumers & manufacturers, as well governement tax revenue F. Calculate the amount of subsidy received by consumers and manufacturers , as well subsidies issued by the governmentThe market demand for rose is QD = 2400–60P and the market supply for rose is QS= –600 +40P. Government imposes a $5 tax per unit of rose sold by the producer.a) Who bears the economic incidence of this tax?b) Why does one side take more burden of tax than the other side?