MyLab Economics with Pearson eText -- Access Card -- for Economics
7th Edition
ISBN: 9780134739403
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Question
Chapter 18, Problem 18.3.10PA
To determine
Whether the burden of a tax will be greater when the supply is less price elastic or more price elastic.
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Students have asked these similar questions
Briefly discuss the effect of price elasticity of supply and demand on tax incidence.
When the demand for a product is less elastic than supply.
pay the majority of the tax on a product; when supply for a product is less elastic than the
demand,
pay the majority of the tax on the pre
firms
consumers
Doyle and Samphantharak (2008) find that when a 5% gas tax is implemented, prices consumers pay for gas increase by about 4%. What role does demand elasticity play in determining the size of this price change? That is, under what demand elasticity cases would the price change be closer to 5%, or closer to 0%? Illustrate and explain using supply-and-demand graph(s)..
Would consumer or producer carry the burden of tax if good is elastic? Show on a graph
Chapter 18 Solutions
MyLab Economics with Pearson eText -- Access Card -- for Economics
Ch. 18 - Prob. 18.1.1RQCh. 18 - Prob. 18.1.2RQCh. 18 - Prob. 18.1.3RQCh. 18 - Prob. 18.1.4RQCh. 18 - Prob. 18.1.5PACh. 18 - Prob. 18.1.6PACh. 18 - Prob. 18.1.7PACh. 18 - Prob. 18.1.8PACh. 18 - Prob. 18.1.9PACh. 18 - Prob. 18.1.10PA
Ch. 18 - Prob. 18.1.11PACh. 18 - Prob. 18.2.1RQCh. 18 - Prob. 18.2.2RQCh. 18 - Prob. 18.2.3RQCh. 18 - Prob. 18.2.4RQCh. 18 - Prob. 18.2.5PACh. 18 - Prob. 18.2.6PACh. 18 - Prob. 18.2.7PACh. 18 - Prob. 18.2.8PACh. 18 - Prob. 18.2.9PACh. 18 - Prob. 18.2.10PACh. 18 - Prob. 18.2.11PACh. 18 - Prob. 18.2.12PACh. 18 - Prob. 18.2.13PACh. 18 - Prob. 18.3.1RQCh. 18 - Prob. 18.3.2RQCh. 18 - Prob. 18.3.3PACh. 18 - Prob. 18.3.4PACh. 18 - Prob. 18.3.5PACh. 18 - Prob. 18.3.6PACh. 18 - Prob. 18.3.7PACh. 18 - Prob. 18.3.8PACh. 18 - Prob. 18.3.9PACh. 18 - Prob. 18.3.10PACh. 18 - Prob. 18.3.11PACh. 18 - Prob. 18.4.1RQCh. 18 - Prob. 18.4.2RQCh. 18 - Prob. 18.4.3RQCh. 18 - Prob. 18.4.4RQCh. 18 - Prob. 18.4.5RQCh. 18 - Prob. 18.4.6PACh. 18 - Prob. 18.4.7PACh. 18 - Prob. 18.4.8PACh. 18 - Prob. 18.4.9PACh. 18 - Prob. 18.4.10PACh. 18 - Prob. 18.4.11PACh. 18 - Prob. 18.4.12PACh. 18 - Prob. 18.4.13PACh. 18 - Prob. 18.4.14PACh. 18 - Prob. 18.4.15PACh. 18 - Prob. 18.1CTE
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- What is the nature of the deadweight loss accompanying taxes? Why is it often referred to as an excess burden?arrow_forwardThe following graph shows the daily market for wine. Suppose the government institutes a tax of $23.20 per bottle. This places a wedge between the price buyers pay and the price sellers receive. Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Using the data you entered in the previous table, calculate the tax burden that falls on buyers and on sellers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table. The burden of the tax falls more heavily on the ___ elastic side of the market.arrow_forwardWhat is the incidence of an excise tax when demand is highly inelastic? Highly elastic? What effect does the elasticity of supply have on the incidence of an excise tax? What is the effifi ciency loss of a tax, and how does it relate to elasticity of demand and supply?arrow_forward
- The graph shows the demand and supply of bungee jumps in Xtremeland. The government decides to impose an 200 Supply 180 excise tax on bungee jumps to help pay for the high 160 number of back and neck injuries. 140 120- 100- 80 60- 40 Demand 20- 50,000 0 10,000 30,000 70,000 Quantity of bungee jumps What would the government's tax revenue be if it imposes a tax of $80 on each jump? What would the government's tax revenue be if it imposes a tax of $40 on each jump? What would the government's tax revenue be if it imposes a tax of $120 on each jump? Price of bungee jumps (S)arrow_forwardMacmillan Learning The graph shows the demand and supply of bungee jumps in Xtremeland. The government decides to impose an excise tax on bungee jumps to help pay for the high number of back and neck injuries. What would the government's tax revenue be if it imposes a tax of $80 on each jump? What would the government's tax revenue be if it imposes a tax of $40 on each jump? S What would the government's tax revenue be if it imposes a tax of $120 on each jump? $ S Price of bungee jumps ($) 200 Supply 180 160. 140 120- 100. 80 60. 40 20 0 10,000 30,000 50,000 Quantity of bungee jumps Demand 70,000arrow_forwardAs price elasticity of demand increases, the burden of a tax gets _______; as price elasticity of supply increases, the burden of a tax gets _________. (Here, you can read "bigger" as "heavier" and "smaller" as "lighter" if that helps.) bigger; bigger smaller; smaller bigger; smaller smaller; biggerarrow_forward
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- Question 11 Explain how do the tax incidence and deadweight loss of a commodity tax vary with the elasticities of demand and supply (you do NOT have to refer to the specific demand and supply in the exercise above. You have to discuss, in general, how the elasticities of demand and supply affects the tax incidence and deadweight loss. A BI EEP Earrow_forwardI need help with HW.arrow_forwardQuestion 37 Refer to Figure 2-1. What is the deadweight loss from this tax? You can answer this in one (or more) of the following ways: Paste a picture or drawing of where to visually find the deadweight loss on the graph. Describe in words where on a graph you would find the deadweight loss (ex: in relation to supply curve, demand curve, above or below or between certain price or quantities) Describe conceptually what the deadweight loss is in this context.arrow_forward
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