Question

In: Economics

3. Please illustrate in one market: a. a $0.15 excise tax b. a $0.15 sales tax...

3. Please illustrate in one market:
a. a $0.15 excise tax
b. a $0.15 sales tax (independently, not a sales and excise tax)
c. Does the legal incidence of the tax affect the economic incidence?
(Be sure to label all graphs and curves.)

Solutions

Expert Solution

Ans) 1)When government imposes tax on sellers, supply curve will shift upwards with the amount of tax. Tax creates a wedge and burden of tax is shared by both buyers and sellers.

2) When tax is imposed on buyers, demand curve will shift downwards by the amount of tax. Tax creates a wedge between supply and demand curve and burden of tax is shared by both buyers and sellers.

3) It does not really matter upon whom the tax is imposed. Burden of tax will be shared by both buyers and sellers. Further, the side of market, which is less elastic, bears the greater burden of tax.

Here, we have assumed that elasticity of supply and demand are equal. Therefore, burden of tax will be equally shared by buyers and sellers regardless upon whom the government imposes tax.


Related Solutions

Consider an excise tax on the market for almonds. Moreover, assume the magnitude of the tax...
Consider an excise tax on the market for almonds. Moreover, assume the magnitude of the tax is $3.00 a pound. Assume the tax is levied on the demand side. a.) Who do you suppose will pay more of the tax? Almond producers or consumers? Why? b.) Draw a graph showing prices and quantities before and after the tax. Moreover label regions of the graph A, B, C, D, etc and show CS, PS, TS, DWL and TR before and after...
How to explain the impact of the operation of an excise tax on tobacco sales with...
How to explain the impact of the operation of an excise tax on tobacco sales with a demand and supply curves? Including the role of price elasticity.
Suppose that a local government levies an excise tax on hotdog sellers. Before the tax, 3...
Suppose that a local government levies an excise tax on hotdog sellers. Before the tax, 3 million hotdogs were sold at a price of $0.75 per hotdog. With the tax in effect, 2.5 million hotdogs are sold, consumers pay $0.95 per hotdog, and sellers receive $0.65 per hotdog. In the scenario above, what is the amount of the tax per hotdog? $ (Enter a number with two digits after the decimal point, e.g., 0.40.) In the scenario above, what percentage...
Which of the following best illustrates a regressive tax(Income, sales property or excise)?
Which of the following best illustrates a regressive tax(Income, sales property or excise)?
30. In a market where the supply curve is perfectly inelastic, how does an excise tax...
30. In a market where the supply curve is perfectly inelastic, how does an excise tax affect the price paid by consumers and the quantity bought and sold? 32. Suppose you could buy shoes one at a time, rather than in pairs. What do you predict the cross-price elasticity for left shoes and right shoes would be?
The government of Markville started charging an excise tax on gasoline. After one year, it was...
The government of Markville started charging an excise tax on gasoline. After one year, it was found that gasoline demand was not different from that before the imposition. The governor of Markville argues that the excise tax has no burden because it showed no change in demand. She also argues that a gas tax can be a relatively efficient way to raise tax revenue. Evaluate her arguments. Note: Let X-axis denote gasoline, and Y-axis denote other goods. Analyze the argument...
b. Illustrate each of your definitions (of sales-oriented and market-oriented) with marketing examples. 8.Customer Relationship Management:...
b. Illustrate each of your definitions (of sales-oriented and market-oriented) with marketing examples. 8.Customer Relationship Management: a. Define customer relationship management (CRM). b. Illustrate your definition with a marketing example. 9.What is the Firm’s Primary Focus given: a. The sales-oriented organization: i. Define ii. Illustrate your definition with a marketing example b. The market-oriented organization i. Define ii. Illustrate your definition with a marketing example
Transfer payments and tax revenue are examples of: Select one: a. automatic stabilizers. b. market transactions....
Transfer payments and tax revenue are examples of: Select one: a. automatic stabilizers. b. market transactions. c. saving measures. d. discretionary measures.
If the government decides to impose a tax of 20 cents per liter on petrol, illustrate the impact of the tax on market equilibrium price
If the government decides to impose a tax of 20 cents per liter on petrol, illustrate the impact of the tax on market equilibrium price, and discuss whether the outcome is efficient by demonstrating the change of consumer’s and producer’s surplus as a result of tax . - Draw a demand and supply model with demand curve - Show the shift of S as a result of 20 cent tax. - Mark the price paid by consumer and received by...
Please select one type of bond and illustrate one of the important bond features with a...
Please select one type of bond and illustrate one of the important bond features with a real-life example.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT