BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

Solutions

Chapter
Section
BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

After economics class one day, your friend suggests that taxing food would be a good way to raise revenue because the demand for food is quite inelastic. In what sense is taxing food a "good" way to raise revenue? In what sense is it not a "good" way to raise revenue?

To determine
The pros and cons of taxing food to raise tax revenue.

Explanation

The tax is the unilateral payment from the people to the government. Tax is the main source of income of the government which can be used for carrying on the public expenditure of the government. The main types of taxes include the income tax, wealth tax and the professional tax. When there is a tax, it will lead to fall in the consumer surplus as well as in the producer surplus. As a result, the total surplus which is the summation of the consumer surplus and the producer surplus will fall and this fall will occur in the total surplus due to taxation which is known as the deadweight loss due to tax.

Food is an important item and it is very essential for the survival of the individuals. Thus, the demand for food will be more inelastic. The people will buy food even though the price increases. Taxing on the commodity which has very inelastic demand curve will lead to a large increase in the tax revenue collected by the government and will create only minimal deadweight loss in the economy...

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

In what ways is economics a science?

Principles of Economics (MindTap Course List)

How is organization height related to the span of management?

Foundations of Business (MindTap Course List)

Describe business marketing

MKTG 12:STUDENT ED.-TEXT

A firm has a 100 million capital budget. It is considering two projects, each costing 100 million. Project A ha...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

The matching principle states that debits should be matched with credits.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)