Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 4, Problem 13CQ
To determine
Describe the effect of more tax burden in the rise of tax revenue.
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Students have asked these similar questions
Suppose the supply curve for cars is more elastic than the demand curve for cars. If the government imposes a tax on car sellers, which party (buyers or sellers) will bear more of the tax burden? How will the tax burden change if the government imposed the tax on car buyers, rather than sellers?
"We should impose a 20 percent luxury tax on expensive automobiles (those with a sales price of $75,000 or more) in order to collect more tax revenue from the wealthy." Will the burden of the proposed tax fall primarily on the wealthy?
Why or why not?
Do you think profit could be maintained if the tax burden were simply passed on to the consumers in the form of higher selling price? How will this affect sales? Explain.
Chapter 4 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- Suppose the California legislature passed a sweeping law to lower the number of regulations for building homes such as decreasing the parking requirements and setback requirements. Suppose there is a housing tax. What is the effect of this law on the PES for housing? What effect would this law have on the tax burden for buyers?arrow_forwardHow can the government improve tax collections without imposing much tax to the consumer?arrow_forwardWhat are pros and cons to increasing the gasoline tax?arrow_forward
- Suppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.8 and 0.7 respectively. Suppose the government imposes a per-unit tax on the cigarette sellers. Who, buyers or sellers, would share a heavier tax burden? Explain your answers without calculation.arrow_forwardIf the government imposes a tax of 8% on luxury cars that the consumer must pay, why does the consumer not actually pay the full 8%? How is it determined how much the consumer will pay and how much the producer will pay? Is it possible for an 8% tax the government imposes on the consumer to actually have 1% paid by the consumer and 7% by the producer? Why or why not?arrow_forwardSuppose that the government has decided to place a $2 per litre tax on soft drinks. In this market, assuming that demand and supply curve have roughly the same responsiveness at their point of intersection, how is the incidence of the tax burden split between consumers and producers? Assuming next that the demand curve is less elastic. How does the tax incidence change?arrow_forward
- Would consumer or producer carry the burden of tax if good is elastic? Show on a grapharrow_forwardSuppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.8 and 0.7 respectively. Suppose the government imposes a per-unit tax of $45 on the cigarette sellers. By how much would buyers share the tax burden respectively? Show your calculation.arrow_forwardThoroughly analyze the impact of taxes on tobacco through the perspective of a smoker (a consumer in the tobacco market) worried about rising prices. Focus on price elasticity in your answer.arrow_forward
- Suppose that a City government introduces a $ 0.50 excise (commodity)tax on consumers of bottles of soda to improve the health of its citizens.manipulate the accompanying graph to demonstrate the impact of the tax on the market for soda. What would be the new equilibrium quantity if instead of taxing consumers,the City of taxed producers?arrow_forwardSuppose the California legislature passed a sweeping law to DECREASING the parking requirements and setback requirements. Suppose there is a housing tax. What is the effect of this law on the PES for housing? What effect would this law have on the tax burden for buyers?arrow_forwardWhat determines whether the buyer or seller pays the bulk of the tax?arrow_forward
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