The tax authorities of Mabalingwe, an imaginary country, have decided to impose a 99% tax on alcohol sales to reduce domestic abuse cases in the country. The tax is payable to the government on purchase of the product. Describe who bears the cost of this tax and, secondly, explain what drives this outcome
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- The tax authorities of Mabalingwe, an imaginary country, have decided to impose a 99% tax on alcohol sales to reduce domestic abuse cases in the country. The tax is payable to the government on purchase of the product. Describe who bears the cost of this tax and, secondly, explain what drives this outcome. Use bullet points.
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- Suppose the supply curve for cars is more elastic than the demand curve for cars. If the government imposes a tax on car sellers, which party (buyers or sellers) will bear more of the tax burden? How will the tax burden change if the government imposed the tax on car buyers, rather than sellers?Example 2: In fall of 2011, the National Christmas Tree Association decided to impose a fee/tax of $0.15 per tree sold.² They claimed the tax revenue raised would fund a new marketing campaign for Christmas tree growers in response to growing plastic tree imports. The proposal quickly drew controversy: some argued that the fee/tax would be passed along in higher prices to consumers, but the National Christmas Tree Association says no. How does the answer to this question depend on the assumption about the price elasticity of demand? a. Consider two graphs of the market for Christmas trees. The supply curve in each market is assumed to be the same. In the left graph, assume the price elasticity of demand is relatively inelastic and in the right graph, assume the price elasticity of demand is relatively elastic. Add labels on your diagram to identify the equilibrium price and quantity of trees before the tax. b. Now, suppose retailers are assessed a tax of amount for each tree sold.…Consider a producer who faces a linear demand curve P = 24 – Q, where P is the price in dollar ($) and Q is the quantity demanded. The producer produces this good at a constant average and marginal cost of $6. Determine the price and quantity if the producer wishes to maximise profits. Suppose the government imposes a tax of $T per unit on the producer. How much will the consumer bear the tax burden? Explain.
- Many studies on rats and mice have established that charred meat grilled over hot coals causes cancer. Since the government cannot easily regulate home cooking methods, an alternative method has been proposed to discourage the consumption of barbecued meat. The proposal is to place a 100 percent tax at the retail level on charcoal briquets. Suppose the daily demand for charcoal was P= 100-Q/10 and the supply was P= 1 + Q./100 where P is in dollars per bag and Q is the number of 20 lb bags of charcoal sold weekly. a. What is the before and after - tax price of charcoal? b. Graph and show the deadweight loss due to the tax c. Why might this deadweight loss over estimate the loss to society from this tax?Congress and the president decide that the United States should reduce air pollution by reducing its use of gasoline. They impose a $ 0.50 tax for each gallon of gasoline soldSuppose 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 on the cigarette sellers. By how much would buyers share the tax burden respectively? Show your calculation.
- How a Pigovian tax affects consumers? Please support your explanation based on a figure.why do comsumers pay the tax on goods if the elasticity of demand is less than the elasticty of supply?Two months ago, on July 1, 2019, the State of Illinois raised gasoline taxes by $.19 (19 cents) per gallon of gas. Now it is past July 2019 and the market has changed. The gasoline tax is in place for all Illinois gasoline stations. In addition to the gasoline tax increase, Illinois dealers on average are noticing that many of their customers are going across the border to buy gasoline in Wisconsin, Iowa, Missouri and Indiana. Not all customers can do this, as they live far from a border. But there is a clear impact on the market for Illinois gasoline producers. Build a graph showing the impact of the Illinois gas tax increase and the shift of some Illinois consumers to border state gas stations, clearly indicating any shifts in the demand and/or supply curves and the resulting equilibrium Price and Quantity. Provide a narrative explaining the shifts. (Both a graph and a narrative are needed for this question)
- Nobel Prize-winning economist Gary Becker suggested that prohibited drugs should be legalized and then taxed. This would the seller's cost and government revenue. a) increase; decrease b) decrease; increase c) increase; increase d) decrease; decreasePrice P₂ P₁ Q₂ ↓ D QuantityIn a country the Government determines to increase the tax on gasoline by $0.20 per gallon. The price of gasoline after taxes though only goes up by $0.15. Does this mean the gas station is not collecting the correct amount of taxes?