Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 6, Problem 6CQQ
To determine
When the impact of tax is mainly on consumers.
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A sales tax is imposed on good A. The supply of good A is not perfectly elastic or perfectly inelastic. Suppose that the demand for good A becomes more inelastic.
(a) Will the tax burden on sellers increase or decrease?
(b) Will the DWL increase or decrease?
Government levied a tax on good A. The less elastic the demand is, the greater or the smaller the tax burden consumers bear?
Also, is the after-tax equilibrium quantity the greater or smaller?
Consumers’ tax burden: After-tax equilibrium quantity:
Q)Economics
If the tax elasticity of supply is 0.16, by how much will the quantity supplied increase when the marginal tax rate decreases from 40 to 36 percent?
Chapter 6 Solutions
Essentials of Economics (MindTap Course List)
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- In a market where the supply curve is perfectly inelastic how does an excise tax affect the price paid by consumers and the quantity bought and sold?arrow_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_forwardNow assume the government raises the tax from $1.00 to $1.50. This causes sale to decline from 10,000 units to 5,000 units. a) calculate the price(tax) elasticity of demand. b) is it elastic, inelastic, or unit elastic? c) what happens to total tax revenue?arrow_forward
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