The United Kingdom had a drinking problem. British per capita consumption of alcohol rose 19% between 1980 and 2007, compared with a 13% decline in other developed countries. Worried about excessive drinking among young people, the British government increased the tax on beer by 42% from 2008 to 2012. Under what conditions will this specific tax substantially reduce the equilibrium quantity of alcohol? Answer in terms of the elasticities of the demand and supply curves.
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- Who would pay a tax imposed on the supplier when the price elasticity of supply is inelastic and the price elasticity of demand is elastic?A local government is seeking to impose a specific tax on hotel rooms. The price elasticity of supply of hotel rooms is 3.5, and the price elasticity of demand is 0.3. If the new tax is imposed, who will bear the greater burden-hotel suppliers or hotel consumers? The hotel consumers pay percent and hotel suppliers pay percent of the tax. (Enter your responses rounded one decimal place.)According to the article, after the city of Berkeley imposed a $0.01 per ounce tax on sugar-sweetened beverages (SSBs), by what percent did consumption of SSBs fall among Berkeley's low-income residents? Who was Berkeley's tax levied on in city law? Buyers or sellers? Assume that the price elasticity of supply for SSBs is elastic and the price elasticity of demand for SSBs is inelastic. What would be the outcome of the sales tax on sugary drinks if the law says that the tax is levied on sellers of the drinks? Who will pay the tax? Assume that the price elasticity of supply for SSBs is elastic and the price elasticity of demand for SSBs is inelastic. What would be the outcome of the sales tax on sugary drinks if the law says that the tax is levied on buyers of the drinks? Who will pay the tax? Explain why your answers to #3 and #4 are different or similar. What determines who pays the tax? What is your opinion of a tax on sugary drinks in your community? Would you be in favor or…
- How does a sugar tax that increases the final price of non-alcoholic beverages with sugar address the problem? Using the concept of price elasticity of demand, is a tax on non-alcoholic beverages with sugar the best way of addressing the problem?Suppose an economist estimates that the price elasticity of supply for red wine is2.4 while its price elasticity of demand is -4.0.If the government decides to impost a per-unit sales tax of $40 per bottle of redwine, how would the market price for red wine be affected? Show yourcalculation.About 100 million pounds of jelly beans are consumed in the U. S. each year, and the price has been about 50 cents per pound. However, jelly bean producers feel that their incomes are too low and have convinced the government that price supports are in order. The government will therefore buy up as many jelly beans as necessary to keep the price at $1 per pound. However, government economists are worried about the impact of this program because they have no estimates of the elasticities of jelly bean demand or supply. 1. Given the market data shown in the graph, the price support costs the government $ ___ million. 2. Which of the following would increase the cost of the program? A) The demand curve becomes relatively more elastic. B) The supply curve becomes relatively more elastice. C) The supply curve becomes relatively mor inelastic. D) Both A and C. E) Both A and B. 3. Draw a new supply or demand curve in such a way the price support causes the greatest loss in consumer surplus.…
- The article described shortcomings of using CAFE standards to improve fuel economy and emissions of carbon from automobiles: “Taxing carbon emissions or gasoline directly, as Europe does, would be far more cost-efficient.” The federal gasoline tax is 18.4 cents per gallon. The impact of an increase in the gasoline tax depends on the reaction of consumers to the tax. A research study found that the price elasticity of demand for gasoline is -0.06. Holding everything else constant, assume that an increase in the federal tax on gasoline results in a 5 percent increase in the price of a gallon of gasoline. If the price elasticity of demand for gasoline is -0.06, how much will the quantity demanded for gasoline change? Explain how you derived your answer.The price decreases from $2,000 to $1,800. Quantity demanded per year increases from 5000 to 6000 units. How is elasticity useful in this problem?Suppose an economist estimates the price elasticity of demand for instant noodle is -2.4, while its price elasticity of supply is 4.0. If the government decides to impost a per-unit sales tax of $16 per pack of instant noodle, how would the market price for instant noodle be affected? Show your calculation.
- Recently, gas prices have soared across the capital region. When the average gas price rose from $3.60 a gallon to $4.40 a gallon, the region observed a slight decrease in consumption of gasoline from 600 million gallons per year to 590 million gallons per year.Based on this information, what would you estimate that the price elasticity of demand is for gasoline in the Capital region? (The answer could be negative or positive and is not necessarily a whole number).The government is considering an increase in the tax on gasoline. They know that the price elasticity of demand for gas is -0.25. The current price is $2.00 per gallon. They are willing to allow the quantity of gas sold to fall by 10%. What would be the approximate tax increase (in cents per gallon) that would lead to a 10% reduction in quantity demanded? Multiple Choice 8 cents 40 cents 80 cents 20 cents 25 centsSuppose (the numbers are loosely based on reality) that the tax on petrol is raised from 40 cents per litre to 60 cents per litre. The before-tax total cost of retailing petrol is $1.20 per litre. Assume that 100% of the tax is always passed through to consumers. After the increase in taxes, the quantity of petrol sold falls from 3,000,000 litres a day to 2,800,000 litres a day. Calculate the price elasticity of demand for petrol using the mid-point formula, based on the change in price due to the tax. Use three decimal places in your calculations. What are the implications for policymakers who want to raise revenue, when considering raising taxes on petrol?