Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 8, Problem 2MCQ
To determine
To identify:
The option that correctly states the situation and the people who will pay the tax levied on sugar.
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32. Suppose the frice elasticity of demand for commodity M is less than one. When a tax
is imposed on commodity M production, it changes the price, quantity, and consumer
spending in which of the following ways? -
Price
Quantity
Spending
Decrease
Increase
Decrease
a.
Increase
Decrease
b.
Decrease
Increase
Decrease
tncrease
C.
Decrease
Increase
Decrease
Suppose that in Australia the price elasticity of steel demand of -1.5 and the price elasticity of steel supply is 1.2. If a tax of $50 per tonne of steel is applied, then:
a. The tax burden on consumers will be greater than the tax burden on suppliers.
b. The tax burden on suppliers will be greater than the tax burden on consumers.
c. The tax burden on consumers will be equal to the tax burden on suppliers.
d. The steel price is unlikely to be substantially affected.
1. What is the relationship between total revenue and own-price elasticity of demand?
2. Illustrate a situation when the producer of a good will have a greater tax incidence than a consumer.What does elasticity have to do with tax incidence?
Chapter 8 Solutions
Foundations of Economics (8th Edition)
Ch. 8 - Prob. 1SPPACh. 8 - Prob. 2SPPACh. 8 - Prob. 3SPPACh. 8 - Prob. 4SPPACh. 8 - Prob. 5SPPACh. 8 - Prob. 6SPPACh. 8 - Prob. 7SPPACh. 8 - Prob. 8SPPACh. 8 - Prob. 9SPPACh. 8 - Prob. 10SPPA
Ch. 8 - Prob. 1IAPACh. 8 - Prob. 2IAPACh. 8 - Prob. 3IAPACh. 8 - Prob. 4IAPACh. 8 - Prob. 5IAPACh. 8 - Prob. 6IAPACh. 8 - Prob. 7IAPACh. 8 - Prob. 8IAPACh. 8 - Prob. 9IAPACh. 8 - Prob. 10IAPACh. 8 - Prob. 1MCQCh. 8 - Prob. 2MCQCh. 8 - Prob. 3MCQCh. 8 - Prob. 4MCQCh. 8 - Prob. 5MCQCh. 8 - Prob. 6MCQCh. 8 - Prob. 7MCQCh. 8 - Prob. 8MCQ
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- Question You are in the business of producing and selling popcorn, cheese, crackers, and wine. The government plans to impose a tax on one of these products. Based on the elasticities in the table provided, as a profit-minded business person, which good would you (the business owner) most prefer to have taxed? Price elasticity Price elasticity of supply of demand Popcorn 1.2 2.0 Cheese 2.2 1.1 Crackers 1.6 1.3 Wine 1.7 1.8 Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Cheese b. Crackers Рорсоrn Winearrow_forwardA sales tax is imposed on good A. The supply of good A is not perfectly elastic or perfectly inelastic. Suppose that the demand for good A becomes more inelastic. (a) Will the tax burden on sellers increase or decrease? (b) Will the DWL increase or decrease?arrow_forward1. When the absolute value of price elasticity of demand is greater than the absolute value of price of elasticity of supply, we can say with certainty: A. Consumers bear most of the tax burden. B. Producers bear most of the tax burden. C. The burden is equal for consumers and producers. D. Any of the above E. None of the abovearrow_forward
- The quantity demanded of salt decreases when the price of pepper increases. This is an example of * own-price elasticity. supply elasticity. income elasticity. O rubber band elasticity. cross-price elasticity. If the government wants to put a per unit tax on a product so that it can raise revenue to support local schools, it would most likely accomplish this goal by doing which of the following? * O placing a tax on a good with an elastic demand. placing a tax on a good that has many substitutes. placing a tax on a good with an inelastic demand. placing a tax on a good with a perfectly elastic demand. O relying of the goodness of mankind and simply ask for donations.arrow_forwardWhen a good is taxed, the burden of the tax fallsmainly on consumers ifa. the tax is levied on consumers.b. the tax is levied on producers.c. supply is inelastic and demand is elastic.d. supply is elastic and demand is inelasticarrow_forwardSuppose that the Australian government imposes a sales tax on a product and both buyers and sellers share the burden of the If the price elasticity of demand for the product is perfectly inelastic. Which of the following is true? Select one: a. Sellers would pay more of the tax than buyers. b. Buyers would pay all of the tax. c. Buyers and sellers would share the tax burden equally. d. Sellers would pay all the tax.arrow_forward
- 6. The government decides to place a $6 unit tax on a product. The following elasticities are known: E, = - 1; E,= 2. By how much does the price paid by the demanders increase because of this tax?arrow_forwardCalculate, interpret and try to explain where applicable in each question, why the elasticities of demand for the following examples occur: a. The government announced an introduction of excise tax from R1 to R1.50 per bottle of beer. This increase results in an overall price increase from R9 to R10.50 per bottle to consumers. The expected tax revenue from this will be R30,000. Before the tax hike, 28,000 beers were sold. b. What will happen to the total revenue of soft drink companies if the elasticity of demand for soft drinks is higher than 1 and the price of soft drinks decreases? c. The quantity demanded of a popular magazine decreases from 10,000 copies to 6,000 per month after the publisher increased the price of a copy from R25 to R40. Total revenue from sales of a prescribed textbook on economics increased from R50,000 to R60,000 when the price of the book increased from R400 to R600 per book. Explain why.arrow_forward1. An example of a market where supply and demand are both inelastic. 2. An example of a market where both supply and demand are both elastic. 3. An example of a market where supply is inelastic and demand is elastic. 4. An example of a market where supply is elastic and deman is inelastic.arrow_forward
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