Principles of Microeconomics (MindTap Course List)
8th Edition
ISBN: 9781305971493
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 8, Problem 6CQQ
To determine
The impact of taxes on the elasticity of demand and supply.
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Students have asked these similar questions
Microeconomics
Question 1: True or False. Explain.
a. When the demand curve of a good shift to
the left, it becomes more inelastic at every level
of price.
b. If the tax burden falls entirely on buyers a
good (tax in per unit imposed on seller), the
demand of that good should be perfectly
elastic.
Question 2: Suppose the demand and supply
for gasoline are given by =20-2P and Q -4+10
where P is the price in $ per gallon, and
quantity is measured in millions of gallons per
day
a. Find the equilibrium price/quantity for this
market
b. How much is the price elasticity of demand
and price elasticity of supply at this
equilibrium?
c. Suppose that the state government decides
to tax $2/gallons on consumers. Find the new
equilibrium prices and the new equilibrium
quantity
d. What is total tax payment in dollars to the
state government? How much is the share of
tax paid by consumers
e Graph your results
If a policymaker wants to raise revenue by taxinggoods while minimizing the deadweight losses, heshould look for goods with _________ elasticities ofdemand and _________ elasticities of supply.a. small; smallb. small; largec. large; smalld. large; large
Suppose we observe that when the market price of a good rises dramatically (e.g., the price of houses during the pandemic) the quantity traded increases only slightly,
This would be because
Answers A - D
A.supply has increased and demand is very elastic.
B.supply has decreased and demand is very elastic.
C.supply has increased and demand is very inelastic.
D. demand has increased and supply is very inelastic.
Chapter 8 Solutions
Principles of Microeconomics (MindTap Course List)
Ch. 8.1 - Prob. 1QQCh. 8.2 - The demand for beer is more elastic than the...Ch. 8.3 - Prob. 3QQCh. 8 - Prob. 1CQQCh. 8 - Prob. 2CQQCh. 8 - Prob. 3CQQCh. 8 - Prob. 4CQQCh. 8 - Prob. 5CQQCh. 8 - Prob. 6CQQCh. 8 - Prob. 1QR
Ch. 8 - Prob. 2QRCh. 8 - Prob. 3QRCh. 8 - Why do experts disagree about whether labor taxes...Ch. 8 - What happens to the deadweight loss and tax...Ch. 8 - Prob. 1PACh. 8 - Prob. 2PACh. 8 - Prob. 3PACh. 8 - Prob. 4PACh. 8 - Prob. 5PACh. 8 - Prob. 6PACh. 8 - Prob. 7PACh. 8 - Prob. 8PACh. 8 - Prob. 9PACh. 8 - Prob. 10PA
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Similar questions
- 14 K You are a policy maker who is interested in increasing tax revenues in order to reduce the Federal budget deficit. One proposal that has been suggested is increase excise taxes on certain goods. Some of the options suggested are: • vacation travel such as cruises • liquor and cigarettes • gasoline . theater and concert tickets Based on your knowledge of elasticity of demand, which items would you choose? Explain.arrow_forwardSuppose 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.arrow_forwardAn increase in demand will have a ____ effect on price and a ____ effect on output when supply is relatively elastic.a. larger; smallerb. larger; largerc. smaller; largerd. smaller; smallerarrow_forward
- a. If price elasticity of demand is -1.3 and price increases by 2 percent, quantity demanded (increases/decreases) by (< 2 percent> 2 percent−2 percent.) b. If price elasticity of demand is -0.3 and price decreases by 2 percent, quantity demanded will (decreases/increases) by (< 2 percent−2 percent> 2 percent.) c. If price elasticity of demand is -1.3 and price increases by 2 percent, quantity demanded will (increases/decreases) by (> 2 percent−2 percent< 2 percent.) d. If price elasticity of demand is -0.3 and price decreases by 2 percent, quantity demanded will (increases/decreases) by (< 2 percent−2 percent> 2 percent.)arrow_forwarda. Describe and briefly explain the importance of the concept of elasticity.b. Explain and demonstrate using appropriate examples how elasticity when it is zero is applied at the level of the government with respect to the setting of prices for various types of goods and services.arrow_forwarda.Examine the ways in which a business might use information about the different elasticities of demand for its product in its decision making. b.Explain why the prices of agricultural products tend to fluctuate more than the prices of manufactured goods.arrow_forward
- Oman recently introduced 5 % business taxes on some products and services. As a result, the supply curve of these goods and services will ______________. a. Shift leftward and there will be less supply b. Shift Rightward and there will be more supply c. Not shift, and the supply remains the same. d. Shift leftward and there will be more supplyarrow_forwardA sales tax will be divided so that buyers pay the full amount if Select one: a. supply is perfectly inelastic. b. supply has unitary elasticity. c. demand is perfectly inelastic. d. demand has unitary elasticity.arrow_forwardThe Ramesy rule suggest that society should a. All of these answers are correct b. tax a few goods with elastic demand at high rates. c. tax goods with relatively inelastic demand at lower rates than goods with relatively elastic demand. d. tax lots of goods at low tax rates.arrow_forward
- A. Option 1: Sensitive, Infinitley Sesitive or Insensitive Option 2: Elastic Demand, Inelastic Supply, Elastic Supply, or Ineleastic Demand B. Option 1: Sensitive, Infinitley Sesitive or Insensitive Option 2: Elastic Demand, Inelastic Supply, Elastic Supply, or Ineleastic Demandarrow_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_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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