Calculate the price and quantity effect of the tax increase. The price effect (the revenue gained from the increase in T) is $ _______ million. The quantity effect (the revenue lost from the decrease in Q) is $_______ million. (remember to use a negative sign here since it's lost revenue)
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The government raises taxes on cigarettes from $1 per to $2 per pack. Prior to the tax increase, 5 million packs were sold each year. The new
(Answer part a by filling the blanks for both parts).
a. Calculate the price and quantity effect of the tax increase.
The price effect (the revenue gained from the increase in T) is $ _______ million.
The quantity effect (the revenue lost from the decrease in Q) is $_______ million. (remember to use a negative sign here since it's lost revenue)
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- If after a tax is imposed, the price paid by the buyer rises by $3 while the price received by the seller falls by $2, and the quantity of goods sold falls from 300 to 200 units, what is the amount of government revenue from this tax?(Figure: Supply Tax) In the accompanying pizza market, with a $2 tax imposed on the sellers, how much of the tax is paid by the buyers and how much of the tax burden is borne by the sellers? Sellers pay all of the $2 tax. Buyers pay all of the $2 tax. Sellers pay $1.50 and buyers pay $0.50 of the tax. Buyers pay $1.50 and sellers pay $0.50 of the tax.QUESTION 1. With the help of a numerical example, explain why California and Maine tax cannabis by weight rather than by price? QUESTION 2. Using the concept of substitutes and complements, explain with the help of a diagram how legalising cannabis may possibly affect the sales of alcohol and cigarettes. When the State government evaluates the effect of legalising cannabis on tax revenue, should it look only at the sales of cannabis? Or, should it also consider the changes in the sales of alcohol and cigarettes?
- Suppose the federal government requires beer drinkers to pay a $2 tax on each case of beer purchased. (In fact, both the federal and state governments impose beer taxes of some sort.) a. Draw a supply-and-demand diagram of the market for beer without the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers?Use graph to explain Suppose prices are PA = 2, PB = 1 and income is n = 100. (a) Show with the graph change in the budget set if the price of x decreased and price of y increased such that P 0 A = 1 and P 0 B = 2. (b) Suppose that the nation taxes (at the new set of prices P 0 A = 1 and P 0 B = 2) the consumer an extra 0.50 dollar for each unit of x he buys beyond 70 units. That is, no tax is collected for units x < 70, and 0. 50$ tax for each x ≥ 70. Show the new budget set in the graph.Suppose that in the absence of any tax whatsoever, the equilibrium price of beer is €1.50 per pint. Now suppose that the government requires beer drinkers to pay a total tax (sales tax plus alcohol duty) of €0.50 on every pint of beer purchased. a) Draw a supply-and-demand diagram of the market for beer without the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers?b)Now draw a supply-and-demand diagram for the beer market with the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers? Has the quantity of beer sold increased or decreased?
- Now draw a supply-and-demand diagram for the liquor market with the tax. Show the price paid by consumers, the price received by producers, and the quantity of liquor sold. What is the difference between the price paid by consumers and the price received by producers? Has the quantity of liquor sold increased or decreased?1. Suppose the federal government requires beer drinkers to pay a $2 tax on each case of beer purchased. a. Now draw a supply-and-demand diagram for the beer market with the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. b. What is the difference between the price paid by consumers and the price received by producers? c. Has the quantity of beer sold increased or decreased? Can you identify any government revenues?Question 5Suppose the federal government requires beer drinkers to pay a $2 tax on each case of beer purchased. a) Draw a supply-and-demand diagram of the market for beer without the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers?b) Now draw a supply-and-demand diagram for the beer market with the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers? Has the quantity…
- Taxation Suppose the federal government requires beer drinkers to pay a $2 tax on each case of beer purchased. (a) Draw a supply-and-demand diagram of the market for beer without the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers? (b) Now draw a supply-and-demand diagram for the beer market with the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers? Has the quantity of beer sold increased or decreased?Taxation Suppose the federal government requires beer drinkers to pay a $2 tax on each case of beer purchased. (a) Draw a supply-and-demand diagram of the market for beer without the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers? (b) Now draw a supply-and-demand diagram for the beer market with the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers? Has the quantity of beer sold increased or decreased? (c) If the producer has an inelastic supply curve, which market participant has the bigger tax burden? Explain.The government has decided that the free-market price of cheese is too low. Suppose the government imposes a binding price floor in the cheese market. Draw a supply-and-demand diagram to show the effect of this policy on the price of cheese and the quantity of cheese sold. Is there a shortage or surplus of cheese? Producers of cheese complain that the price floor has reduced their total revenue. Is this possible? Explain. In response to cheese producers’ complaints, the government agrees to purchase all the surplus cheese at the price floor. Compared to the basic price floor, who benefits from this new policy? Who loses?