Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN: 9781305971493
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 6, Problem 6PA
To determine
The impact of $500 tax on luxury cars.
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Students have asked these similar questions
Under which circumstances does the tax burden fall entirely on consumers?
The Indian government places a Rs. 1,000 tax on smart phones, will the price paid by consumers raise by more than Rs. 1,000, less than Rs. 1,000 or exactly Rs. 1,000? Explain.
A local government is seeking to impose a specific tax on hotel rooms. The price elasticity of supply of hotel rooms is 3.5, and the price elasticity of demand is 0.3.
If the new tax is imposed, who will bear the greater burden-hotel suppliers or hotel consumers?
The hotel consumers pay percent and hotel suppliers pay
percent of the tax. (Enter your responses rounded
one decimal place.)
Chapter 6 Solutions
Principles of Microeconomics (MindTap Course List)
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- Who would pay a tax imposed on the supplier when the price elasticity of supply is inelastic and the price elasticity of demand is elastic?arrow_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_forwardUse the concept of Price Elasticity of Demand to explain why the public policy recommendation of raising taxes on cigarettes causes State revenues to rise while also effectively deterring smoking among young people. Be sure to consider availability of substitutes and the effect of the percentage spent of each buyer’s budget when formulating a response. Who bears the brunt of the tax – the consumer or the producer? Are there any potential negative side effects of increasing taxes on cigarettes?arrow_forward
- How does a sugar tax that increases the final price of non-alcoholic beverages with sugar address the problem? Using the concept of price elasticity of demand, is a tax on non-alcoholic beverages with sugar the best way of addressing the problem?arrow_forwardIn a country the Government determines to increase the tax on gasoline by $0.20 per gallon. The price of gasoline after taxes though only goes up by $0.15. Does this mean the gas station is not collecting the correct amount of taxes?arrow_forwardHOW DO YOU RESPOND TO PRICE ELASTICITY? People have unlimited needs and wants for their personal satisfaction and because of that the prices of products easily get changed. Everyone is affected with the new normal in the market. The prices of products have become very expensive since the outbreak of the pandemic, not only in our locality, but in the whole world. If your income or the income of your family is not enough to purchase the basic commodities needed by your family, what goods would you buy, instead? What economic or marketing strategies would you apply? How would you respond to the price changes of these commodities?arrow_forward
- If cigarettes and marijuana had been found to be substitutes, what would a tax placed on cigarettes do? decrease the demand for marijuana increase the demand for marijuana decrease the quantity demanded of marijuana increase the quantity demanded of marijuanaarrow_forwardWho does elasticity matter to the most? The government, the firm/business, or the individual/consumer.arrow_forwardWhat would it mean if the elasticity of demand for a good was zero? Explain whether it can be possible for the price elasticity of demand for a good to be zero, at least over some range of prices. Can the elasticity of demand be zero for all possible prices? Explain how or why not.arrow_forward
- "If the government wishes to tax certain goods, it should tax goods that have inelastic rather than elastic demand". What is the rationale for this statement?arrow_forwardIf the government places a $500 tax on luxury cars,will the price paid by consumers rise by more than$500, less than $500, or exactly $500? Explainarrow_forwardThe price elasticity of demand is -3, the price elasticity of supply is 1. The government imposes a per-unit tax of 80 Cents on the sale of a cup of coffee in paper cups. Compute how much of the 80 Cents per cup is actually borne by the consumer and how much is borne by the seller.arrow_forward
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