Price 21 20 10.5 10 9.5 0 Market for Pants 100 150 Sup De Suppose a $1 per unit tax is placed on buyers of pants. Calculate how much tax revenue comes from producers of pants. $50 $25 $0 $100
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- Under which circumstances does line tax burden fall entirely on consumers?20 Demand Supply 18 16 14 さ12 10 8. 12 14. 16 20 QUANTITY Which of the following statements is not correct? When the price is 510.quantity supplied equala quantity demanded. DWhen the price is 512.shere is a surplus of 4 units. 0When the price is S16.quantity supplled exceecs ouantity demanded by 1 units. When.the price ls S6 there is a surplus of8units. PRICEWhen airfares between Santa Rosa and Los Angeles averages $69, the quantity consumed is 42,500 tickets. One day, an airline tax is levied equal to $10.00 and output falls to 37,000 tickets. Assume that air travelers end up paying 75% of the tax. Calculate the price elasticity of demand and & interpret coefficient. Use the general formula, not the mid point formula Calculate the price elasticity of supply and interpret coefficient. Use the general formula, not the mid point formula. How do total sales in the airline market before and after the tax support your answer in (n) and/or (o)?
- 11. Consider public policy aimed at smoking. a. Studies indicate that the price elasticity ofdemand for cigarettes is about 0.4. If a packof cigarettes currently costs $2 and thegovernment wants to reduce smoking by20 percent, by how much should it increasethe price? b. If the government permanently increasesthe price of cigarettes, will the policy have alarger effect on smoking one year from nowor five years from now? c. Studies also find that teenagers have ahigher price elasticity than do adults. Whymight this be true?In Class, 10–25 Minutes for Teams For each of thefollowing products, determine at least three differentprices that might be charged. Then survey each of theindividuals within your group to find out how much ofeach product they would buy at each price point foreach of the products. For each product, calculate theprice elasticity of demand to determine whether thedemand is elastic or inelastic.a. Cheese pizzas per monthb. Movie tickets per monthc. Concert tickets per yearwere.34.7 0 W e denerg esteyf demand for pood 12 O000
- 2. Suppose the price.elasticity of demand for commödity M is less than one. When a tax is imposed on commodity Mproduetion, it changes the price, quantity, and consumer speņding in which of the following ways? - Price Quantity Spending Irierease Decrease Decreàse. Therease Ancrease a. Increase- b. -Deerease Decrease Decrease Decrease - Decrease IacreaseTable 3.8 shows information on the demand andsupply for bicycles, where the quantities of bicycles aremeasured in thousands. a. What is the quantity demanded and the quantitysupplied at a price of $210?b. At what price is the quantity supplied equal to48,000?c. Graph the demand and supply curve for bicycles.How can you determine the equilibrium priceand quantity from the graph? How can youdetermine the equilibrium price and quantityfrom the table? What are the equilibrium priceand equilibrium quantity?d. If the price was $120, what would the quantitiesdemanded and supplied be? Would a shortageor surplus exist? If so, how large would theshortage or surplus be?Suppose the income elasticity of demand for food is 0.5 and the price casticity of demand -1.0. Suppose also that your housemate Claire spends $10,000 per year on food, that the price of food is $4, and that her Acome is $50,000. a) If a S4 sales tax on food were to cause the price of food to double, how much food woukl Claire's consume? b) Suppose she is given a state sales tax rebate of $5,000 to case the effect of the tax." Now how much food would she-cat? c) Briefly discuss how you know whether she would be better or worse off when given a rebate to the sales tax payments?
- The New York Times reported (Feb. 17, 1996) thatsubway ridership declined after a fare increase:“There were nearly four million fewer riders inDecember 1995, the first full month after the priceof a token increased 25 cents to $1.50, than in theprevious December, a 4.3 percent decline.”a. Use these data to estimate the price elasticity ofdemand for subway rides.b. According to your estimate, what happensto the Transit Authority’s revenue when thefare rises?c. Why might your estimate of the elasticity beunreliable?What is the relationship between total surplus and economic efficiency?7. Effect of a tax on buyers and sellers The following graph shows the daily market for jeans. Suppose the govermment institutes a tax of $23.20 per pair. This plae price buyers pay and the price sellers recelve. 100 90 Supply Tax Wedge 50 40 30 20 10 Demand 10 20 40 50 60 70 100 QUANTITY (Pairs of jeans) R8S PRICE (Dollars per pair)
