When airfares between Santa Rosa and Los Angeles averages $69, the quantity consumed is 42,500 tickets. One day, an airline tax is levied equal to $10.00 and output falls to 37,000 tickets. Assume that air travelers end up paying 75% of the tax.Briefly describe how you would illustrate the market for air travel before the tax?Due to the tax, briefly describe what happens to supply and/or demandThe tax causes the Qd of air travel to ____ and Qs of air travel to ____The new price paid by air travelers is ____The new price received by airlines is ______Carefully identify the area of new consumer surplus after the taxCarefully identify the are of new producer surplus after the taxThe loss of output and increase in price due to the tax creates a ____ to this marketTotal expenditures or sales of air travel will be____.Total revenues generated by airlines will be _____Total tax revenue generated by the government will be ____Total taxes paid by air travelers will be ____Total taxes paid by airlines will be ____Calculate the price elasticity of demand and & interpret coefficient. Use the general formula, not the mid point formulaCalculate the price elasticity of supply and interpret coefficient. Use the general formula, not the mid point formula.How do total sales in the airline market before and after the tax support your answer in (n) and/or (o)?

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Answered: When airfares between Santa Rosa and…

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter7: Demand And Supply

Section: Chapter Questions

Problem 20AA

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When airfares between Santa Rosa and Los Angeles averages $69, the quantity consumed is 42,500 tickets. One day, an airline tax is levied equal to $10.00 and output falls to 37,000 tickets. Assume that air travelers end up paying 75% of the tax.

Briefly describe how you would illustrate the market for air travel before the tax?

Due to the tax, briefly describe what happens to supply and/or demand

The tax causes the Qd of air travel to ____ and Qs of air travel to ____

The new price paid by air travelers is ____

The new price received by airlines is ______

Carefully identify the area of new consumer surplus after the tax

Carefully identify the are of new producer surplus after the tax

The loss of output and increase in price due to the tax creates a ____ to this market

Total expenditures or sales of air travel will be____.

Total revenues generated by airlines will be _____

Total tax revenue generated by the government will be ____

Total taxes paid by air travelers will be ____

Total taxes paid by airlines will be ____

Calculate the price elasticity of demand and & interpret coefficient. Use the general formula, not the mid point formula

Calculate the price elasticity of supply and interpret coefficient. Use the general formula, not the mid point formula.

How do total sales in the airline market before and after the tax support your answer in (n) and/or (o)?

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