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When the price of demand is high and the price elasticity is low the burden of a tax falls primarily on

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Application: The Cost Of Taxation

Section8.2: The Determinants Of The Deadweight Loss

Problem 2QQ: The demand for beer is more elastic than the demand for milk. Would a tax on beer or a tax on milk...

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When the price of demand is high and the price elasticity is low the burden of a tax falls primarily on

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Elasticity of demand depicts how much consumer responds with the change in price.

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Suppose the elasticity of demand for a product is 0 and the elasticity of supply is 1. If the government imposes a tax on the product, then: a) buyers pay a smaller share of the tax than do sellers but both buyers and sellers pay some of the tax. b) seller pays all of the tax c) buyers and sellers pay exactly the same share of the tax. d) buyer pays all of the tax
Assuming the demand and supply curve are elastic, discuss the incidence of a tax imposed on the supplier
The side of the market with the relatively higher elasticity will face more of the tax burden. Select one: a. True b. False
refer to the graph shown. given the same supply elasticity, the burden of a 10 percent tax would be borne the most by the consumer in seg
q17- The greater the elasticities of demand and supply the: Select one: a. greater the deadweight loss from a tax b. smaller the deadweight loss from a tax c. less intrusive a tax will be on a market d. more equitable the distribution of a tax between buyers and sellers
Discuss how elasticity of demand can impact the size of the deadweight loss in a market subject to taxation
Suppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.8 and 0.7 respectively. Suppose the government imposes a per-unit tax on the cigarette sellers. Who, buyers or sellers, would share a heavier tax burden? Explain your answers without calculation.
How do the relative elasticities of supply and demand determine tax or subsidy incidence?
Taxing a good with very elastic demand generates more deadweight loss than taxing a good with very inelastic demand because a. the government does not bother collecting the revenue. b. the change in consumer behavior is smaller. c. consumers have to pay these taxes out of pocket. d. the change in consumer behavior is greater. e. the amount of the tax is larger.
If a constant $1 per unit tax is imposed on producers, A. producers can always pass the tax burden to consumers by raising the price by a dollar. B. producers will pay more than $0.5 tax for each unit of the good sold if supply is less elastic than demand. C. producers will pay less than $0.5 tax for each unit of the good sold if demand is more elastic than supply. D. producers must absorb the tax themselves and cannot raise the price.
Minnesota and Tennessee, among other states, have recently begun to tax the sales of healthcare providers, such as hospitals and physicians. Analyze the incidence of this sales tax for three different scenarios: (a) The demand for medical services is completely inelastic while the supply curve is positively sloped to the right. (b) The demand curve is downward sloping and supply is completely inelastic (for this case, it is best to shift the demand curve downward by the amount of the per-unit tax). (c) The demand curve is downward sloping and the supply curve is positively sloped. (d) When does the consumer or health care provider pay a larger portion of the tax? (e) Why?
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