This year, the price-demand and price-supply equations for bourbon whiskey are,respectively:p = 850 - 0.25Q (price-demand)p = 200 + 0.15Q (price-supply)Quantities Qd and Q are measured in million of cases, and the pricep is for onecase.The government has just announced that, effective immediately, it will impose anexcise tax of $20 per case on all distilled spirits, including bourbon whiskey.Question:How would the tax excise change the revenues from selling bourbon whiskey?Hint: Calculate the revenues before the tax is implemented and the revenues afterthe tax is implemented.Revenues drop by $1.5 billionRevenues drop by $3.125 billionRevenues increase by $4.29 billionRevenues drop by $2.5 billionRevenues increase by $1.5 billion

The equilibrium price and quantity of a good are determined by the demand and the supply of the…

Answered: This year, the price-demand and…

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter5: Elasticity Of Demand And Supply

Section: Chapter Questions

Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...

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On Tuesday, the price and quantity demanded are 7 and 120 units, respectively. Ten days later, the price and quantity demanded are 6 and 150 units, respectively. What is the price elasticity of demand between the 7 and 6 prices?
(Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of Si per unit. A reduction in price to $0.20 results in an increase in quantity demanded to 70 units. Using the midpoint formula, show that these data yield a price elasticity of 0.25. By what percentage would a 10 percent rise in the price reduce the quantity demanded, assuming price elasticity remains constant along the demand curve?
In the state of Santa Lucia cigarettes were selling for $8.03 per pack before a $0.25 per pack increase. Last year about 3.8 million pack of cigarettes were sold per month at $8.03 per pack. The price elasticity of demand for cigarette packs is -1.35. How much revenue, in millions of dollars, will be produced each month from this new tax?
Suppose (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?
The short-run demand and supply elasticities for crude oil are -0.076 and 0.088, respectively. The current price per barrel is $30 and the short-run equilibrium quantity is 23.84 million barrels per year. Derive the linear demand and supply What will be the effects on the market price and quantity if the U.S. government decides to purchase (and store away) an additional 2 million barrels of oil? Assume that the additional consumption of oil by the government results in a parallel shift of the supply curve to the left by 2 million barrels per What could be the economic rationale for buying and storing oil?
Suppose that the government enacts a tax on retail sales of road salt, which homeowners and businesses put on walkways and driveways. Assume that the supply of salt is perfectly elastic, due to the ease with which suppliers can stockpile the product.Before the tax, 900 fifty-pound bags of road salt are sold at an equilibrium price of $7 per bag. After the tax, 775 bags are sold at $8 per bag. How much revenue does the tax generate for the government? What is the amount of the tax? $
on 18 of 75 The price elasticity of demand for lychee fruit is 1.3, while the price elasticity of supply is 0.7. The incidence of a $0.25 excise tax placed on lychee fruit will be higher for consumers. equal for producers and consumers. nonexistent for both producers and consumers. higher for producers.
The inverse demand for table salt is p = 200qd+1 , while the inverse supply of table salt is p = 10+ 2qs. a. Find and interpret the price elasticity of supply (es) at the after-tax equilibrium price and quantity. (The equilibrium price before the tax is equal to 10.091, and after the tax is equal to 10.4949.)
The short-run demand and supply elasticities for crude oil are -0.076 and 0.088, respectively. The current price per barrel is $30 and the short-run equilibrium quantity is 23.84 million barrels per year. What will be the effects on the market price and quantity if the government decides to purchase (and store away) an additional 2 million barrels of oil? Assume that the additional consumption of oil by the government results in a parallel shift of the supply curve to the left by 2 million barrels per day What could be the economic rationale for buying and storing oil?
Can you please determine whether this statement is True or False, and explain why. Thank you Statement = The value of the income elasticity of demand for automobiles indicates how damaging a decline in personal income tax will be for the car industry
To encourage people to stop smoking the government of a country introduces an indirect tax of 20% on the price of cigarettes(Currently 10$ per packet). The price elasticity of demand for cigarettes in the country is estimated to be 0.6. Describe the likely impact the tax will have on a, the demand for cigarettes b, government revenue
Suppose that both wheat and corn have an income elasticity of 0.1 a. If the average income in the economy increases by 2 percent each year, by what percentage does the quantity demanded of wheat increase each year, holding all other factors constant? Holding all other factors constant, if 10 billion bushels are demanded this year, by how many bushels will the quantity demanded increase next year if incomes rise by 2 percent? b. Given that average personal income doubles in the United States about every 30 years, by about what percentage does the quantity demanded of corn increase every 30 years, holding all other factors constant?

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