MyLab Economics with Pearson eText -- Access Card -- for Foundations of Economics
8th Edition
ISBN: 9780134518312
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 8, Problem 4SPPA
To determine
To explain:
The effect of tax cut on the
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In an effort to curb planetary obesity, authorities levy a tax of $20 per unit of lunar candy. How much of this tax is borne by the sellers? That is, by how much does the seller’s price change?
demand - q = 600 − 2p
supply - q = 2p − 400
Equilibrium price - 250
Equilibrium Quantity- 100
Use the equation Ps= Pd+ Tax to solve
ANSWER IS 10
Figure 5.3 shows the demand and supply curves in the market for milk. Currently, the market is in equilibrium. If the government imposes a $2 per gallon tax to be collected from sellers, calculate the dead weight loss associated with the tax, and explain why the dead weight loss occurs
If the government removes a tax on a good, then the price paid by buyers will
a)increase, and the price received by sellers will increase
b)increase, and the price received by sellers will decrease
c)decrease, and the price received by sellers will increase
d)decrease, and the price received by sellers will decrease
Chapter 8 Solutions
MyLab Economics with Pearson eText -- Access Card -- for Foundations of Economics
Ch. 8 - Prob. 1SPPACh. 8 - Prob. 2SPPACh. 8 - Prob. 3SPPACh. 8 - Prob. 4SPPACh. 8 - Prob. 5SPPACh. 8 - Prob. 6SPPACh. 8 - Prob. 7SPPACh. 8 - Prob. 8SPPACh. 8 - Prob. 9SPPACh. 8 - Prob. 10SPPA
Ch. 8 - Prob. 1IAPACh. 8 - Prob. 2IAPACh. 8 - Prob. 3IAPACh. 8 - Prob. 4IAPACh. 8 - Prob. 5IAPACh. 8 - Prob. 6IAPACh. 8 - Prob. 7IAPACh. 8 - Prob. 8IAPACh. 8 - Prob. 9IAPACh. 8 - Prob. 10IAPACh. 8 - Prob. 1MCQCh. 8 - Prob. 2MCQCh. 8 - Prob. 3MCQCh. 8 - Prob. 4MCQCh. 8 - Prob. 5MCQCh. 8 - Prob. 6MCQCh. 8 - Prob. 7MCQCh. 8 - Prob. 8MCQ
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- Draw a diagram where sellers have to pay a $X tax to the Government on each unit that they sell. Then this tax is decreased to $Y. Draw a demand and supply diagram showing this tax reduction causing an increase in Government taxation revenue. Please provide a written explanation for your diagram and discuss its policy implications. ( maximum word limit: 250 words)arrow_forwardIf the government places a $500 tax on luxury cars,will the price paid by consumers rise by more than$500, less than $500, or exactly $500? Explainarrow_forwardTaxes & Subsidies Suppose that, in order to incentivize drivers to switch to electric vehicles, a government imposes a tax to be added to the purchase price of gasoline cars and a subsidy (discount voucher) on the purchase of electric cars. You can assume whatever you think is reasonable about the demand and supply elasticities to prices. Illustrate the likely effects of those policies using graphs. Discuss: What happens to the quantity of gasoline and electric cars in equilibrium? Who bears the burden of the tax, and who enjoys the subsidy in your model (between producers and consumers)? As a policymaker, do you want demand and supply curves to be more or less price elastic for the policy to work?arrow_forward
- The Indian government places a Rs. 1,000 tax on smart phones, will the price paid by consumers raise by more than Rs. 1,000, less than Rs. 1,000 or exactly Rs. 1,000? Explain.arrow_forwardSuppose that the government imposed a price ceiling on cows. Would you expect theprice of steak to increase, decrease, or stay the same? Explain your answer.arrow_forwardThe government is interested in imposing a tax on the local gasoline market. Using a tax modified demand, indicate in an appropriate diagram the effect of this tax on this market, labeling everything. Explain what happens to demand, supply, equilibrium price and equilibrium quantity exchanged and why. please give me correct answer with proper explanation and diagramarrow_forward
- 1. If the market consists of Michelle Laura and Hillary and the price falls by one dollar the quantity demanded in the market increases by how much? 2. if the market consists of Michelle and Laura only and the price falls by one dollar the quantity demanded in the market increases by how much?arrow_forward1. Explain the exceptions to the Law of demand using the distinction between substitution and income effects.2. Distinguish between an inferior good and a Giffen good.3. What uses can be made by the government of the law of demand in deciding about the price policy and tax cum subsidy policy. 4. Explain the circumstances where the law of supply may not holdarrow_forwardUse the concept of Price Elasticity of Demand to explain why the public policy recommendation of raising taxes on cigarettes causes State revenues to rise while also effectively deterring smoking among young people. Be sure to consider availability of substitutes and the effect of the percentage spent of each buyer’s budget when formulating a response. Who bears the brunt of the tax – the consumer or the producer? Are there any potential negative side effects of increasing taxes on cigarettes?arrow_forward
- If the government places a tax of $500 on luxury cars, what happens in the market? Please assume demand and supply that are "normal" i.e. not completely elastic and not completely inelastic. Demand is downward sloping and supply upward sloping :) Question 7 options: The price goes up by less than $500, and quantity sold goes up The price goes up by less than $500, and quantity sold goes down The price goes up by more than $500, and quantity sold goes down The price goes up by more than $500, and quantity sold goes uparrow_forwardconsider the details of good X given and answer the questions below. Use illustrations If the government imposed a tax of Rs.3/- on every unit that is being supplied find the new equilibrium price and quantity, how is tax shared between consumers and suppliers Price Quantity Demanded Quantity supplied 12 120 20 20 40 140arrow_forwardThe government taxes both clothing and tobacco. For a similarly sized tax, would you expect the quantity demanded of clothing or tobacco to be more affected?arrow_forward
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