Myeconlab With Pearson Etext -- Access Card -- For Microeconomics
9th Edition
ISBN: 9780134143071
Author: PINDYCK, Robert, Rubinfeld, Daniel
Publisher: PEARSON
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Question
Chapter 9, Problem 5E
(a)
To determine
Identify the new program introduced by the government to support the jelly beans.
(b)
To determine
Identify the effect of price support program on consumers.
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About 100 million pounds of jelly beans are consumed in the U. S. each year, and the price has been about 50 cents per pound. However, jelly bean producers feel that their incomes are too low and have convinced the government that price supports are in order. The government will therefore buy up as many jelly beans as necessary to keep the price at $1 per pound. However, government economists are worried about the impact of this program because they have no estimates of the elasticities of jelly bean demand or supply. 1. Given the market data shown in the graph, the price support costs the government $ ___ million. 2. Which of the following would increase the cost of the program? A) The demand curve becomes relatively more elastic. B) The supply curve becomes relatively more elastice. C) The supply curve becomes relatively mor inelastic. D) Both A and C. E) Both A and B. 3. Draw a new supply or demand curve in such a way the price support causes the greatest loss in consumer surplus.…
The short-run demand and supply elasticities for crude oil are -0.076 and 0.088, respectively. The current price per barrel is $30 and the short-run equilibrium quantity is 23.84 million barrels per year.
What will be the effects on the market price and quantity if the government decides to purchase (and store away) an additional 2 million barrels of oil? Assume that the additional consumption of oil by the government results in a parallel shift of the supply curve to the left by 2 million barrels per day
What could be the economic rationale for buying and storing oil?
Suppose an economist estimates the price elasticity of demand for sugary drinks is -4.2, while its price elasticity of supply is 1.2.
If the government decides to impose a per-unit tax of $9 per can of sugary drinks sold, how would the market price of sugary drinks be affected? Show your calculation
Chapter 9 Solutions
Myeconlab With Pearson Etext -- Access Card -- For Microeconomics
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- Suppose (the numbers are loosely based on reality) that the tax on petrol is raised from 40 cents per litre to 60 cents per litre. The before-tax total cost of retailing petrol is $1.20 per litre. Assume that 100% of the tax is always passed through to consumers. After the increase in taxes, the quantity of petrol sold falls from 3,000,000 litres a day to 2,800,000 litres a day. Calculate the price elasticity of demand for petrol using the mid-point formula, based on the change in price due to the tax. Use three decimal places in your calculations. What are the implications for policymakers who want to raise revenue, when considering raising taxes on petrol?arrow_forwardUsing your answers from the previous table, calculate the tax burden that falls on buyers and on sellers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method.arrow_forwardAnswer the given question with a proper explanation and step-by-step solution. Using your answers from the previous table, calculate the tax burden that falls on buyers and on sellers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table.arrow_forward
- If we want to increase the cigarette tax to promote environmentally-friendly behavior, the tax will discourage the consumption of cigarettes by the greatest extent when the price elasticity of demand equalsarrow_forwardSuppose the equilibrium price in a market is $4. If a $4 per-unit tax is levied on the market, the price buyers effectively pay with the tax is $6. which of the following is true? Demand is more elastic than supply. Supply is more elastic than demand. Supply and demand are equally elastic Demand is unit elasticarrow_forwardMany studies on rats and mice have established that charred meat grilled over hot coals causes cancer. Since the government cannot easily regulate home cooking methods, an alternative method has been proposed to discourage the consumption of barbecued meat. The proposal is to place a 100 percent tax at the retail level on charcoal briquets. Suppose the daily demand for charcoal was P= 100-Q/10 and the supply was P= 1 + Q./100 where P is in dollars per bag and Q is the number of 20 lb bags of charcoal sold weekly. a. What is the before and after - tax price of charcoal? b. Graph and show the deadweight loss due to the tax c. Why might this deadweight loss over estimate the loss to society from this tax?arrow_forward
- The aggregate demand for a cup of coffee in Chicago is given by q = 4,000 - 500 p, where p is the price of a cup of coffee. If the price is $4, then the price elasticity of demand for coffee isarrow_forwardSuppose an economist estimates the price elasticity of demand for instant noodle is -2.4, while its price elasticity of supply is 4.0. If the government decides to impost a per-unit sales tax of $16 per pack of instant noodle, how would the market price for instant noodle be affected? Show your calculation.arrow_forwardAccording to the article, after the city of Berkeley imposed a $0.01 per ounce tax on sugar-sweetened beverages (SSBs), by what percent did consumption of SSBs fall among Berkeley's low-income residents? Who was Berkeley's tax levied on in city law? Buyers or sellers? Assume that the price elasticity of supply for SSBs is elastic and the price elasticity of demand for SSBs is inelastic. What would be the outcome of the sales tax on sugary drinks if the law says that the tax is levied on sellers of the drinks? Who will pay the tax? Assume that the price elasticity of supply for SSBs is elastic and the price elasticity of demand for SSBs is inelastic. What would be the outcome of the sales tax on sugary drinks if the law says that the tax is levied on buyers of the drinks? Who will pay the tax? Explain why your answers to #3 and #4 are different or similar. What determines who pays the tax? What is your opinion of a tax on sugary drinks in your community? Would you be in favor or…arrow_forward
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