Macroeconomics
11th Edition
ISBN: 9781260506891
Author: Colander
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 13QE
(a)
To determine
(b)
To determine
Equilibrium price and quantity with a unit tax.
(c)
To determine
Equilibrium price and quantity with a unit tax on consumers.
(d)
To determine
Impact of the tax levied on different groups.
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
The demand and supply equations for a product are: Q* =
0.2
300 – 6P and Q' = -40 + 6P.
Determine the market equilibrium and draw graphs.
Suppose that the government decides to impose a flat tax of
10% on each unit sold. Show that the price that consumers pay
would be the same if the government imposed a tax of Rs.
1.70 per unit sold. Draw graphs and explain.
Also calculate the total revenue earned by sellers before and
after the tax, the tax revenue raised by the government,
changes in consumer and producers surplus and dead weight
loss.
The demand and supply equations for a product are: Q^d=300-6p and Q^x=-40+6p.
. Determine the market Equilibrium and draw graphs. Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumers pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graph and explain
. Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producers surplus and dead weight loss
Draw the supply and demand curves associated with the table below.
Price Qs Qd
$0.00 50 200
0.50 100 175
1.00 150 150
1.50 200 125
2.00 250 100
(a) What is equilibrium price and quantity?
(b) What is equilibrium price and quantity with a $0.75 per-unit tax levied on suppliers? Demonstrate your answer graphically.
(c) How does your answer to b change if the tax were levied on consumers, not suppliers? Demonstrate your answer graphically.
(d) What conclusion can you draw about the difference between levying a tax on suppliers and consumers?
Chapter 5 Solutions
Macroeconomics
Ch. 5.1 - Prob. 1QCh. 5.1 - Prob. 2QCh. 5.1 - Prob. 3QCh. 5.1 - Prob. 4QCh. 5.1 - Prob. 5QCh. 5.1 - Prob. 6QCh. 5.1 - Prob. 7QCh. 5.1 - Prob. 8QCh. 5.1 - Prob. 9QCh. 5.1 - Prob. 10Q
Ch. 5.A - Prob. 1QECh. 5.A - Prob. 2QECh. 5.A - Prob. 3QECh. 5.A - Prob. 4QECh. 5.A - Prob. 5QECh. 5.A - Prob. 6QECh. 5.A - Prob. 7QECh. 5.A - Prob. 8QECh. 5.A - Prob. 9QECh. 5 - Prob. 1QECh. 5 - Prob. 2QECh. 5 - Prob. 3QECh. 5 - Prob. 4QECh. 5 - Prob. 5QECh. 5 - Prob. 6QECh. 5 - Prob. 7QECh. 5 - Prob. 8QECh. 5 - Prob. 9QECh. 5 - Prob. 10QECh. 5 - Prob. 11QECh. 5 - Prob. 12QECh. 5 - Prob. 13QECh. 5 - Prob. 14QECh. 5 - Prob. 15QECh. 5 - Prob. 16QECh. 5 - Prob. 17QECh. 5 - Prob. 1QAPCh. 5 - Prob. 2QAPCh. 5 - Prob. 3QAPCh. 5 - Prob. 4QAPCh. 5 - Prob. 5QAPCh. 5 - Prob. 1IPCh. 5 - Prob. 2IPCh. 5 - Prob. 3IPCh. 5 - Prob. 4IPCh. 5 - Prob. 5IPCh. 5 - Prob. 6IPCh. 5 - Prob. 7IPCh. 5 - Prob. 8IPCh. 5 - Prob. 9IPCh. 5 - Prob. 10IPCh. 5 - Prob. 11IPCh. 5 - Prob. 12IPCh. 5 - Prob. 13IPCh. 5 - Prob. 14IP
Knowledge Booster
Similar questions
- Suppose buyers of fountain drinks are required to send $0.50 to the government for every fountain drink they buy. Further, suppose this tax causes the effective price received by sellers of fountain drinks to fall by $0.25 per fountain drink. Which of the following statements is correct? a. The price paid by buyers is $0.25 per drink more than it was before the tax. b. This tax causes the supply curve for fountain drinks to shift downward by $0.50 at each quantity. c. This tax causes the demand curve for fountain drinks to shift downward by $0.50 at each quantity. d. Forty percent of the burden of the tax falls on buyers.arrow_forwardThe demand and supply equations for a product are: Q"= 300 – 6P and Q' = -40 + 6P. Determine the market equilibrium and draw graphs. Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumers pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graphs and explain. • Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producers surplus and dead weight loss.arrow_forwardSuppose the price elasticity of demand for smartphones is 0.5 (absolute value), while the price elasticity of supply is 1.9. If the government imposes a per-unit tax of $100 on the sellers of smartphones, how will the price and quantity transacted of smartphones change? Will the sellers or the buyers bear a larger tax burden? Will the market be able to achieve economic efficiency after the tax is imposed? Explain with a diagram.arrow_forward
- C). Suppose that the equilibrium price for this product is $4 and the equilibrium quantity is 100 units. If the government imposes a price floor of $5 what happens? Draw the new graph explaining how quantities are affected by that decision. D). Now, consider that the government imposes a tax of $0.50 on sellers. Show what happens to the initial equilibrium price of $4 and draw the new quantity on the graph. E). The government imposes a tax of $0.50 on buyers. Show what happens to the initial equilibrium price of $4 and draw the new quantity on the graph. F). Explain how the burden of the two different taxes (as seen in C and D, above) is divided between buyers and sellers. G). If you are a buyer in these cases, would you prefer a relatively elastic or inelastic demand curve compared to the supply curve? Why? H). If you are a seller in these cases, would you prefer a relatively elastic or inelastic supply curve compared to the demand curve? Whyarrow_forwardThe demand and supply equations for a product are: Q= 300 — 6P and Q.= -40 + 6P. Determine the market equilibrium and draw graphs. Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumers pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graphs and Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producer surplus, and deadweight loss.arrow_forward40) Use the following graph for a competitive market to answer the question below. $3.50 * $2.50 300 400 Price A $1.25 D Quantity Assume the government imposes a $2.25 tax on suppliers, which results in a shift of the supply curve from S1 to S2. How much of the total tax revenue is paid by the buyer? 41) You have decided that you want to attend a costume party as Iron Man. You estimate that it will cost $40 to assemble your costume. After spending $40 on the costume, you realize that the additional pieces you need will cost you $25 more. The marginal cost of completing the costume is $( ).arrow_forward
- A). Draw the supply and demand curves for the market of specific good. B). Suppose that the equilibrium price for this product is $4 and the equilibrium quantity is 100 units. If the government imposes a price ceiling of $3 what happens? Draw the new graph explaining how quantities are affected by that decision. C). Suppose that the equilibrium price for this product is $4 and the equilibrium quantity is 100 units. If the government imposes a price floor of $5 what happens? Draw the new graph explaining how quantities are affected by that decision.arrow_forwardIf a tax of $1.20 is imposed on consumers in this market, what is the tax revenue?arrow_forwardThe demand for tomatoes is Q = 40-4P and the supply of tomatoes is Q = P +10. Answer the following questions. (a) Suppose that $1 per unit tax is levied on the consumers. Who bears the economic incidence of this tax? (b) Calculate the deadweight loss (c) Suppose that stores will pay $1 per unit tax directly. What will happen to the "sticker price" on tomatoes? How will the size of the consumer tax burden change? (d) Suppose that tax is increased to $2 per unit on the consumers. Calculate the deadweight loss. Compare the size of the deadweight loss with (b).arrow_forward
- The demand and supply equations for a product are: Qd = 300 - 6P and Qs = -40 + 6P. Determine the market equilibrium and draw graphs. Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumer pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graphs and explain. Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producers surplus and dead weight loss.arrow_forwardThe demand and supply equations for a product are: Qd= 300 — 6P and Qs= -40 + 6P. Determine the market equilibrium and draw graphs. Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumers pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graphs and explain. Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producers surplus, and deadweight lossarrow_forwardPlease written by computer source Suppose that the demand curve for a product is given by Q = 100 −10p and the supply curve is Q = 10p. Assume that income effects (elasticities) are small so consumer surplus is a good measure of consumer welfare. (a) What is the equilibrium price and quantity with no distortions? (b) The government imposes a tax of $2.00 per unit sold. What is the new equilibrium quantity? Sketch the market equilibrium in a graph. (c) Given the tax what is the change in consumer surplus? What is the change in producer surplus? What is the change in government revenue? What is the net Dead Weight Loss from the tax? (d) Say the government proposes to use the revenue from the tax to pay for snacks in our last ECON 312A lecture. The total social benefits from the snacks would be $82.00. Will the tax increase overall welfare if the revenue is used to buy the snacks? What is the dollar value of the net gain or loss to society?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
