Calculate the market price, Taxation

In an effort to reduce alcohol consumption, the government is considering a $1 tax on each gallon of liquor sold (the tax is levied on producers). Suppose that the supply curve for liquor is upward sloping and its equation is  Q = 30,000P (where Q is the number of gallons of liquor and P is the price per gallon). The demand curve for liquor is Q 500,000 - 20,000P.

a.  Calculate the market price, the price paid by consumers, and the price received by sellers, before and after the tax is levied.

b.  Calculate the elasticities of demand and supply at the pre-tax equilibrium price and quantity and relate these elasticity numbers (qualitatively) to your findings in part (a).

c.  From part (a) (and the change in quantity) calculate the change in consumer surplus and the change in producer surplus resulting from the tax.

d.  How much revenue does the tax raise? How might the researcher allocate these revenues when analyzing the incidence of the tax burden?

Read the paper by Ruggeri and Bourgeois (2009) posted on Blackboard. They note that a carbon tax affects carbon emissions by changing the prices of the taxed fuels relative to prices of all other goods and services in the economy, thus providing an incentive for reducing the consumption of carbon-based fuels. This shift in prices has implications for the distribution of the tax burden across individuals in the economy. In particular, this shift takes place at three levels: (1) fuels used in electricity generation; (2) energy used by the industrial-commercial sector; and (3) energy used directly by the final consumer (the residential and public administration sectors). Summarize the authors' analysis of the shifting of tax burdens that occurs across each of these three broad levels of the economy. 

6.  What is meant by the "retail sector" of an economy? The article by Bird and Smart on tax incidence notes that a large portion of Provincial Retail Sales Taxes in Canada are in fact paid on business inputs, such as cars, tools, groceries for restaurants, etc.). In other words, many producers have to pay the RST. Use a demand and supply diagram to analyze the impact of the portion of the RST being levied on producers. Draw your diagram in such a way as to represent the authors' findings about the tax incidence of the RST paid on business inputs.

Posted Date: 2/19/2013 5:11:26 AM | Location : United States







Related Discussions:- Calculate the market price, Assignment Help, Ask Question on Calculate the market price, Get Answer, Expert's Help, Calculate the market price Discussions

Write discussion on Calculate the market price
Your posts are moderated
Related Questions
Roberta Santos, age 41, is single and lives at 120 Sanborne Avenue, Springfield, IL 60781. Her Social Security number is 123-45-6789. Roberta has been divorced from her former husb

The taxpayer exchanges property in 2010 with a fair market value of $5,500,000 that has a basis of $750,000. The property is also subject to a mortgage of $2,500,000. The taxpaye

Use the information provided in question 4 to answer this question. a) What must happen to taxes in year t for the primary deficit to be zero? b) What must happen to taxes in y

Hello, I am  zainab ali, i want help in Tax assignment.. In 2012 Joe, age 15, earned $2900 from acting and had $12,200 of interest income and $14,000 of taxable qualifie

The Madison Restaurant was formed a S corporation at the end of last year. Bob Buron, owns 60% of the stock, manages the restaurant. Ray Huges owns the remaining 40%

Problem Facts. Larry K. and Cathy L. Zepp have been married 19 years. Larry is 62 years old (Social Security number 123-45-6789) while Cathy is 57 years old (Social Security number

Avis's taxable income for the year is $300,000 and Best's taxable income for the year is $425,000. For each of the scenarios provided, (a) state if a control group has been created

Facts Valerie Lawson and Clara Norman are the sole equal shareholders in the corporation of Lawson And Norman Enterprises, Inc.  The corporation, which is a retail office suppl

Given the below facts, what is the total income effect for the year for an investor for its equity-method investment? T y pe of Investment: Equity Method

I am zainab ali, i want help in Tax assignment..   In 2012 Joe, age 15, earned $2900 from acting and had $12,200 of interest income and $14,000 of taxable qualified dividend