Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 8, Problem 9SPPA
To determine
To state:
Comments on the incidence of tax on sugary drinks and the interpretation about the elasticities and
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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
Wine
Q Sea
Aplia Homework: Elasticity of Demand and Supply
The following graph shows the daily market for jeans when the tax on sellers is set at $0 per pair.
Suppose the government institutes a tax of $5.80 per pair, to be paid by the seller. (Hint: To see the impact of the tax, enter the value of the tax in
the Tax on Sellers field and move the green line to the after-tax equilibrium by adjusting the value in the Quantity field. Then, enter zero in the Tax on
Sellers field. You should see a tax wedge between the price buyers pay and the price sellers receive.)
Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph.
Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly.
Graph Input Tool
50
Market for Jeans
45
I Quantity
(Pairs of jeans)
50
40
Supply
Demand Price
(Dollars per pair)
Supply Price
(Dollars per pair)
75.00
17.00
35
30
25
Supply…
Use the following table to calculate the price
elasticity of supply for computers
Use the following table to calculate the price elasticity of supply for computers.
Quantity Supplied
Price
$250
$500
75
100
Price Elasticity of Supply:
If the price elasticity of demand is -1, which side of the market would have the highest tax incidence (pay more of a sales tax)? (buyers/sellers)
HAND WRITTEN OTHERWISE SKIP
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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- 1. Use the graph below to answer the questions that follows: Price Dollars per gallon GH¢9.00 GH¢7.00 GH¢4.00 12,000 18,000 30,000 Quantity (gallons per day) d. Suppose imposition of maximum price legislation reduced the price oil from the equilibrium price to the maximum price control price. Calculate: Price elasticity of demand Price elasticity of supply i. ii. e. From your calculation, which of the two curves is more elastic? Explain your answer.arrow_forward56. Table 3.10 shows the supply and demand for movie tickets in a city. Graph demand and supply and identify the equilibrium. Then calculate in a table and graph the effect of the following two changes. 1. Three new nightclubs open. They offer decent bands and have no cover charge, but make their money by selling food and drink. As a result, demand for movie tickets falls by six units at every price. 2. The city eliminates a tax that it placed on all local entertainment businesses. The result is that the quantity supplied of movies at any given price increases by 10%. Price per Pound Qd Qs $5.00 26 16 $6.00 24 18 $7.00 22 20 $8.00 21 21 $9.00 22 Table 3.10 20arrow_forward4. In order to reduce farm output, raise farm prices, and thus raise farm incomes (revenues), the government pays farmers to set aside a portion of their land from production. Using a graph, explain in terms of the elasticity of demand for farm products why farmers may be better-off when harvests are low even if we ignore the money they receive from the set-aside program.arrow_forward
- Subject:eco The elasticity of demand for maracas is –2.0, and the elasticity of supply is 3.0. How much will the price of maracas change with a per-unit tax of $1? Who bears the larger burden of the tax, consumers or producers?arrow_forward7. Effect of a tax on buyers and sellers The following graph shows the daily market for jeans. Suppose the government institutes a tax of s20.30 per pair. This places a wedge between the price buyers pay and the price sellers receive. 100 90 80 Demand Supply 70 50, 50 60 50 Тах Wedge 40 30 20 10 10 20 30 40 50 60 70 B0 90 100 QUANTITY (Pairs of jeans) Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity Price Buyers Pay Price Sellers Receive (Pairs of jeans) (Dollars per pair) (Dollars per pair) Before Tax After Tax Using the data you entered in the previous table, calculate the tax burden that falls on buyers and on sellers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table. Tax Burden (Dollars per pair) Elasticity Buyers Sellers The burden of the tax falls more heavily on the elastic…arrow_forward6. Effect of a tax on buyers and sellers The following graph shows the weekly market for handbags in some hypothetical economy. Suppose the government levies a tax of $11.60 per bag. The tax places a wedge between the price buyers pay and the price sellers receive. 45 40 10 S Tax Wedge Demand Supply 30 40 50 60 70 80 100 QUANTITY (Bags of handbags) Complete the following table by filling in the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity (Bags of handbags) Price Buyers Pay (Dollars per bag) Price Sellers Receive (Dollars per bag) Before Tax After Tax Using your answers from the previous table, calculate the tax burden that falls on buyers and on sellers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table. Buyers Sellers Tax Burden (Dollars per bag) Elasticity The tax burden falls more heavily on the side of the market…arrow_forward
- 5. Consider the following is the demand and supply for basketballs in Germany. Demand 700 600 500 400 300 200 100 Supply 0 0 100 200 300 400 500 Price (€) 2.00 2.50 3.00 3.50 4.00 4.50 5.00 a. Sketch the demand and supply curves. What would be the equilibrium price and quantity? b. Suppose the government imposes a €0.5 tax per basketball on the producers. Find the new equilib- rium price and quantity. Add the new supply curve to your graph. c. Now, assume the government changes the tax by switching it from the producer to the consumer. What will be the new equilibrium price and quantity? Add the new demand curve to your graph from part (b).arrow_forward6. 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_forwardThe government wants to stop obesity in children, so they decide to tax soda producers for each unit of soda sold. If demand for soda is relatively elastic, and supply is relatively inelastic will suppliers or consumers pay a larger share of the tax? Briefly explain why.arrow_forward
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