Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 8.2, Problem 2QQ
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Scenario...Recently there has been discussion in the news about taxing junk food (soft drinks, for example) in an effort to reduce the incidence of obesity in the U.S. Is this an example of elastic or inelastic with respect to price? considering price elasticity of demand, is the deadweight loss of a soda/junk-food tax relatively large or relatively small? Why? Would the tax be a good idea? Would it help reduce the number of obese people in the United States?
Based on your knowledge of the price elasticity of demand, do you think the deadweight loss of a soda/junk-food tax would be relatively large or relatively small?
Recently there has been discussion in the news about taxing junk food (soft drinks, for example) in an effort to reduce the incidence of obesity in the U.S. Do you think the demand for junk food is elastic or inelastic with respect to price?
Based on your knowledge of the price elasticity of demand, do you think the deadweight loss of a soda/junk-food tax would be relatively large or relatively small? Why? Do you think taxing junk food would be a good idea? Based on your analysis, would it really help reduce the number of obese people in the United States? Explain.
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Essentials of Economics (MindTap Course List)
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- What is the nature of the deadweight loss accompanying taxes? Why is it often referred to as an excess burden?arrow_forwardNeither the supply of nor the demand for a good is perfectly elastic or perfectly inelastic. Imposing a tax on the good results in a __________ in the price paid by buyers and _________ in the equilibrium quantity.arrow_forwardDiscuss how elasticity of demand can impact the size of the deadweight loss in a market subject to taxationarrow_forward
- The state of Colorado's excise tax on beer is 8 cents per gallon. Suppose that the excess burden created by this tax is $40 million. If the tax is increased from 8 cents to 12 cents per gallon, what will be the new excess burden in this market? (The answer is $90 million)arrow_forwardOne of the following would not to lead to a deadweight loss. Which one? Select one: a. A tax imposed on sellers when demand is downward sloping and supply is perfectly elastic b. A price ceiling that is set below the equilibrium price c. A subsidy paid to sellers when both demand and supply are elastic, but not infinite d. A tax imposed on sellers when demand is perfectly inelastic e. All the above will result to a deadweight lossarrow_forwardConsider the market for BP gasoline. If the market has a very elastic supply and a very inelastic demand, how would the burden of a tax on BP gasoline be shared between producers and consumers? Draw a graph to support your answer.arrow_forward
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