Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 8, Problem 6CQQ
To determine
The impact of taxes on the elasticity of
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Students have asked these similar questions
If a policymaker wants to raise revenue by taxinggoods while minimizing the deadweight losses, heshould look for goods with _________ elasticities ofdemand and _________ elasticities of supply.a. small; smallb. small; largec. large; smalld. large; large
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:
True, False or Depends. Please develop your answers
1. "Who pays the costs of a tax will depend mainly on the will of the legislators, as they decide whether to tax the suppliers or the demanders of the good".
2. "The sunk efficiency loss generated by a tax is higher with relatively elastic supply and relatively inelastic demand compared to the reverse situation (relatively inelastic supply and relatively elastic demand)".
Chapter 8 Solutions
Essentials of Economics (MindTap Course List)
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- Peanut butter has an upward-sloping supplycurve and a downward-sloping demand curve. If a10 cent per pound tax is increased to 15 cents,the government’s tax revenuea. increases by less than 50 percent and may evendecline.b. increases by exactly 50 percent.c. increases by more than 50 percent.d. The answer depends on whether supply ordemand is more elastic.arrow_forwardSuppose households supply 500 billion hours of labor per year and have a tax elasticity of supply of 0.16. If the tax rate is increased by 19.6 percent, by how many hours will the supply of labor decline? a) 28.67 billion b) 1.568 trillion c) 2.465 trillion d) 3.422 trillion e) 9.183 trillionarrow_forwardA 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?arrow_forward
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