Economics (with Digital Assets, 2 Term (12 Months) Printed Access Card)
Economics (with Digital Assets, 2 Term (12 Months) Printed Access Card)
12th Edition
ISBN: 9781285738338
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 20, Problem 14QP
To determine

The impact of decrease in the price elasticity of demand on the tax paid by the buyers.

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What is the price elasticity of demand(Using the Midpoint method) when the price changes from $10 to $13? If the Government imposes a tax of $6 per burrito, how many burritos will be sold in the market?
Suppose an economist estimates the price elasticity of demand for instant noodle is -2.4, while its price elasticity of supply is 4.0. If the government decides to impost a per-unit sales tax of $16 per pack of instant noodle, how would the market price for instant noodle be affected? Show your calculation.
What would it mean if the elasticity of demand for a good was zero? Explain whether it can be possible for the price elasticity of demand for a good to be zero, at least over some range of prices. Can the elasticity of demand be zero for all possible prices? Explain how or why not.
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