EBK PRINCIPLES OF MICROECONOMICS
12th Edition
ISBN: 9780134069180
Author: Oster
Publisher: YUZU
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Question
Chapter 19, Problem 2.5P
(a)
To determine
Identify the equilibrium price and
(b)
To determine
Identify the new equilibrium price and new equilibrium quantity and calculate the value of per unit tax.
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The demand and supply equations for a product are:
Qd= 300 — 6P and Qs= -40 + 6P.
Determine the market equilibrium and draw graphs.
Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumers pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graphs and explain.
Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producers surplus, and deadweight loss
The demand and supply equations for a product are:
Q= 300 — 6P and Q.= -40 + 6P.
Determine the market equilibrium and draw graphs.
Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumers pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graphs and
Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producer surplus, and deadweight loss.
The demand and supply equations for a product are: Q^d=300-6p and Q^x=-40+6p.
. Determine the market Equilibrium and draw graphs. Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumers pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graph and explain
. Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producers surplus and dead weight loss
Chapter 19 Solutions
EBK PRINCIPLES OF MICROECONOMICS
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- At the current market equilibrium, the price elasticity of demand for a certain good is much higher than the price elasticity of supply. If the government imposes a $2 specific tax on this good, who will bear more of the burden of the tax? Illustrate.arrow_forwardSuppose that the demand and supply functions for a good are given as follows: Demand: Q = 720 –8P Supply: Q = -160 + 3P What is the price elasticity of demand at the equilibrium when there is no tax? 8 4. 0.5 1.25arrow_forwardthe government has imposed an indirect tax on good A and the coefficient of the price elasticity of demand is <1. Explain and demonstrate with the use of appropriate diagrams the effect of this tax on both the buyer and seller. indicate in your diagram by shading the regions in different colours the price paid by consumer and price paid by supplier.arrow_forward
- Suppose demand is D and supply is S0 so that equilibrium price is $10. If an excise tax of $6 is imposed on this product, what happens to the equilibrium price paid by consumers? The price received by producers? The number of units sold?Equilibrium price paid by consumers: $ Price received by producers: $ Number of units sold:arrow_forwardIf a tax of $1.20 is imposed on consumers in this market, what is the tax revenue?arrow_forwardSuppose that the demand for tea in Boston is described by Quantity demanded = 20-p and the quantity supplied = 2p-4. What would be the price paid by consumers if there was a 6 dollar tax on tea?arrow_forward
- Consider the following demand and supply functions:Qd = 80 − 2PQs = −100 + 8P (i) Find the equilibrium price and quantity(ii) Suppose govt. imposes a sales tax of TK.4 per unit, calculate the new equilibrium price and quantity.(iii) Suppose govt. provides subsidy of TK.3 per unit, calculate the new equilibrium price and quantity.arrow_forwardAccording to the article, after the city of Berkeley imposed a $0.01 per ounce tax on sugar-sweetened beverages (SSBs), by what percent did consumption of SSBs fall among Berkeley's low-income residents? Who was Berkeley's tax levied on in city law? Buyers or sellers? Assume that the price elasticity of supply for SSBs is elastic and the price elasticity of demand for SSBs is inelastic. What would be the outcome of the sales tax on sugary drinks if the law says that the tax is levied on sellers of the drinks? Who will pay the tax? Assume that the price elasticity of supply for SSBs is elastic and the price elasticity of demand for SSBs is inelastic. What would be the outcome of the sales tax on sugary drinks if the law says that the tax is levied on buyers of the drinks? Who will pay the tax? Explain why your answers to #3 and #4 are different or similar. What determines who pays the tax? What is your opinion of a tax on sugary drinks in your community? Would you be in favor or…arrow_forwardSuppose the price elasticity of demand for smartphones is 0.5 (absolute value), while the price elasticity of supply is 1.9. If the government imposes a per-unit tax of $100 on the sellers of smartphones, how will the price and quantity transacted of smartphones change? Will the sellers or the buyers bear a larger tax burden? Will the market be able to achieve economic efficiency after the tax is imposed? Explain with a diagram.arrow_forward
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