Compute how the tax affects the price paid by consumers

Assignment Help Finance Basics

Reference no: EM131490564

Question: Use a general equilibrium framework to discuss the possible incidence of a tax on cigarettes.

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 demand curve is QD = 500,000 - 20,000P (where QD is the number of gallons of liquor demanded and P is the price per gallon), and the supply curve for liquor is QS = 30,000P (where QS) is the number of gallons supplied).

a. Compute how the tax affects the price paid by consumers and the price received by producers.

b. How much revenue does the tax raise for the government? How much of the revenue comes from coniumers, and how much from producers?

c. Suppose that the demand for liquor is more elastic for younger drinkers than for older drinkers. Will the liquor tax be more, less, or equally effective at reducing liquor consumption among young drinkers? Explain.

Reference no: EM131490564

Questions Cloud

Develop at least five major goals for the it strategic plan : Develop at least five major goals for the IT strategic plan. Speculate on three positive organizational impacts of implementing the strategic plan.

Suppose you were transported to the mythical planet krypton : Suppose you were transported to the mythical planet Krypton, whose mass is four times greater than that of Earth and whose diameter is twice that of Earth.

What are the multiple ways you might solve this problem : JWI 580: Business Analytics Assignment: Case Study Brief. For this assignment, you will take on the role of an employee of health company CSP.

Analyze the effects of the same tax : For commodity X, average cost is equal to marginal cost at every level of output Assuming that the market for Xis competitive and the demand curve is linear.

Compute how the tax affects the price paid by consumers : Use a general equilibrium framework to discuss the possible incidence of a tax on cigarettes.

How much exhaust heat is discharged per hour : If the plant produces electric energy at the rate of 1.3 GW, how much exhaust heat is discharged per hour?

Find the equilibrium price and output as functions : Suppose that the demand curve for a particular commodity is QD = a - bP, where QD is the quantity demanded, P is the price, and a and b are constants.

Explain three differences between dna and rna : Examine three differences between DNA and RNA then explain two main reasons why DNA is the most favorable molecule for genetic material.

Sky diver steps from a hight-flying helicopter : A sky diver steps from a hight-flying helicopter. If there were not air resistance, how fast would she be falling at the end of a 12 second jump?

User Account

All Pages