Micro Economics For Today
10th Edition
ISBN: 9781337613064
Author: Tucker, Irvin B.
Publisher: Cengage,
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Chapter P2, Problem 10KC
To determine
The impact when the
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Which of the following statements about the relationship between elasticity and tax incidence are true ?
Choose one or more:
A.The incidence of a tax depends on who the tax is placed on.
B.When demand is more inelastic than supply, consumers bear more of the incidence of a tax.
C.A tax on a good for which both demand and supply are relatively inelastic will cause a relatively large transfer of welfare from consumers and producers to the government.
D.When demand is more inelastic than supply, producers bear more of the incidence of a tax.
E.If a tax is imposed on a good with a perfectly inelastic demand, then consumers bear the full incidence of the tax.
Which of the following statements about the relationship between elasticity and tax incidence are true ?Choose one or more:
A.The incidence of a tax depends on who the tax is placed on.
B.When demand is more inelastic than supply, consumers bear more of the incidence of a tax.
C.A tax on a good for which both demand and supply are relatively inelastic will cause a relatively large transfer of welfare from consumers and producers to the government.
D.When demand is more inelastic than supply, producers bear more of the incidence of a tax.
E.If a tax is imposed on a good with a perfectly inelastic demand, then consumers bear the full incidence of the tax.
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Answer completely.
You will get up vote for sure.
Suppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.8 and 0.7 respectively. Suppose the government imposes a per-unit tax of $45
Some economists believe that a sales tax, in general, is undesirable. Explain. Despite this, why do most countries still impose a tax on cigarette? Explain plausible arguments.
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- The reason which determines the elasticity of tax burden on buyers and sellers.arrow_forwardWhen supply is perfectly elastic, who bears the burden of tax? Select one: a. producers b. consumers c. producers and consumers d. sellersarrow_forwardIf elasticity of demand is greater than elasticity of supply, more tax incidence will be on who? A. Seller B. Buyerarrow_forward
- Would consumer or producer carry the burden of tax if good is elastic? Show on a grapharrow_forwardDetermine burden of the tax (or the incidence of the tax that falls on consumers and producer). Who gets most of the burden of the tax. Answer on the basis of elasticity. How much tax revenue is expected by the government to be raised for this good per year?arrow_forward1. Discuss the impact of the imposition of a tax (on the seller). What happens to the following? Price paid by the buyer Price received by the seller Quantity of the good sold Consumer surplus Producer surplus Total surplus 2. Is the impact different if the tax is placed on the buyer? 3. How does elasticity impact the incidence of a tax?arrow_forward
- Q)Economics If the tax elasticity of supply is 0.16, by how much will the quantity supplied increase when the marginal tax rate decreases from 40 to 36 percent?arrow_forwardIdentify whether the statements about the economics of taxes are true or false. a. An excise tax can distort incentives and create missed opportunities for mutually beneficial transactions. b. When demand is elastic and supply is inelastic, the burden of a tax falls mainly on consumers. c. When demand is inelastic and supply is elastic, the burden of a tax falls mainly on producers. d. The incidence of a tax is determined by which group – buyers or sellers – must actually pay the govarrow_forwardAssume that the demand for coal is more elastic than the supply. A tax on coal will a. increase the price of coal paid by buyers, and sellers bear a smaller burden of the tax b. decrease the price of coal that sellers really get, and sellers have to bear a bigger burden of the tax c. decrease the price of coal paid by buyers, and buyers have to bear a bigger burden of the tax d. increase the price of coal that sellers really get, and buyers bear a smaller burden of the taxarrow_forward
- Suppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.6 and 0.8 respectively. a. Suppose the government imposes a per-unit tax on the cigarette sellers. Who, buyers or sellers, would share a heavier tax burden? Explain your answers without calculation. b. Suppose the government imposes a per-unit tax of $40 on the cigarette sellers. By how much would buyers and sellers of cigarettes share the tax burden respectively? Show your calculation. c. Suppose many small sellers, such as newsstands, complain the heavy tax burden borne by them. Would it be better to these small sellers if the government decides to impose a $20 per-unit tax on both the buyers and the sellers of cigarette? Explain.arrow_forwardQuestion 6 When a tax per unit is placed on the buyer of a good: a the equilibrium price falls and the total amount spent by the buyer decreases if demand is elastic. b when prices increase from the tax, the supply increases because of the higher price. c the buyer and seller share the burden of the tax with the seller receiving relatively less and the buyer paying relatively more. d the seller charges all of the tax to the buyer since the tax was not placed on the seller.arrow_forwardA per unit tax is imposed on the seller that shifts the supply curve to the left. Ceteris paribus, the greater the elasticity of demand, the ______. Select all that apply. A. smaller is the burden of the tax on the consumers. B. larger is the burden of the tax on the consumers C. smaller is the burden of the tax on the producers D. larger is the burden of the tax on the producersarrow_forward
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