The demand elasticity for milk is -0.1 and the supply elasticity is 12.0. If the government applies a specific tax to milk, what would be the consumer incidence? Suppose that after the imposition of a specific tax of 1$ on aspirin the consumer bears a tax incidence of 0.6. If the demand elasticity of aspirin is -0.5, what is the supply elasticity?

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Insha FatimaLv10

28 Sep 2019

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Suppose the government applies a specific tax to a good where the demand elasticity, epsilon, is negative -1. and the supply elasticity, is l.5 If a specific tax, of $1.50 were placed on the good, what is the price increase that consumers would pay?

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indigoraccoon10

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The following present select elasticity of demand elasticity of demand estimates: Barnes & Noble books = - 4.00, Coca-Cola = - 1.22, Cigarettes = -0.25, Beer = -0.23, Gasoline = -0.06.

Using the elasticity estimates in the table above, classify the price elasticity demand as elastic or inelastic. Explain your reasoning.

Explain the implications of those classifications on tax revenue collections when the per-unit tax increases as opposed to decreases.

Using those classifications, make some assumptions regarding tax incidence. For instance, will buyers or sellers pay a larger portion of the tax per unit? Explain.

Conclude, based on the elasticity classifications, their effect on tax revenue and tax incidence, and which goods the government would prefer to tax.

Suppose the demand for gasoline is inelastic and the supply of gasoline is elastic. Therefore, ____.

a. buyers bear most of the incidence of a tax on gasoline.

b. sellers bear most of the incidence of a tax on gasoline.

c. the government bears most of the incidence of a tax on gasoline.

d. the incidence of a tax on gasoline depends if the tax is imposed on sellers or on buyers.