The government is in need of tax revenue and has narrowed down the choice of markets to tax to two: cigarettes or t-shirts. The markets are summarised below. Cigarettes Demand: P = 100 – 4Q Supply: P = Q T-shirts Demand: P = 35 – ½Q Supply: P = 5 + ½Q Graph the two markets and calculate the equilibrium price and quantity. If the government implemented a $5 tax on each market, how much tax revenue could each market generate? If you were an economic advisor, which market would you suggest taxing and why?
The government is in need of tax revenue and has narrowed down the choice of markets to tax to two: cigarettes or t-shirts. The markets are summarised below. Cigarettes Demand: P = 100 – 4Q Supply: P = Q T-shirts Demand: P = 35 – ½Q Supply: P = 5 + ½Q Graph the two markets and calculate the equilibrium price and quantity. If the government implemented a $5 tax on each market, how much tax revenue could each market generate? If you were an economic advisor, which market would you suggest taxing and why?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The government is in need of tax revenue and has narrowed down the choice of markets to tax to two: cigarettes or t-shirts. The markets are summarised below.
Cigarettes
Supply: P = Q
T-shirts
Demand: P = 35 – ½Q
Supply: P = 5 + ½Q
Graph the two markets and calculate the
If the government implemented a $5 tax on each market, how much tax revenue could each market generate?
If you were an economic advisor, which market would you suggest taxing and why?
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