Think about the market for parking spaces in downtown LA. There is little flexibility in terms of changing the number of parking spaces provided. On the other hand, there are many substitutes for parking in the city such as taking the train or parking just outside the city and taking a bus. a. Please draw the market for parking spaces in downtown LA.    b. If a tax is applied on parking spaces, what happens to the quantity? c. Who pays most of the tax burden?

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Asked Oct 29, 2019
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Think about the market for parking spaces in downtown LA. There is little flexibility in terms of changing the number of parking spaces provided. On the other hand, there are many substitutes for parking in the city such as taking the train or parking just outside the city and taking a bus.

 

a. Please draw the market for parking spaces in downtown LA.

 

 

 

 

b. If a tax is applied on parking spaces, what happens to the quantity?

 

c. Who pays most of the tax burden?
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Expert Answer

Step 1

a.

When the demand for the parking lot is high in the town and the availability of the parking slots are very limited, it would result in the higher price for parking in the town. This is due to the fact that the equilibrium price in the market is determined at the intersection of the demand and supply curves in the economy. This can be illustrated as follows:

Price of parking pts
Supply
E
Demand
Quantity of parking lots
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Price of parking pts Supply E Demand Quantity of parking lots

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Step 2

b.
When there is tax imposed on the parking lots, it will increase the cost of parking lots in the market. When there is increased price for the parking lot, consumers would go for the substitutes available in the economy. Since there are substitutes such as the parking outside town and taking public transports, people would go for the substi...

Price of parking lots
Supply
E2
p2
Demand
q2
Quantity of parking lots
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Price of parking lots Supply E2 p2 Demand q2 Quantity of parking lots

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