Question

2. Suppose supply is perfectly inelastic and demand is relatively elastic. Who bear all the tax burden, buyers or sellers? Explain in details.

3. Suppose demand for electricity is inelastic, but not perfectly. A sales tax is imposed, and the tax is levied on buyers. Draw a graph to show the effects of the tax. Indicate CS, PS, tax revenue and DWL after tax on your graph.

Answer #1

1 - Since the supply is inelastic but the demand is elastic in nature , the seller will bear the burden of the taxes and all other extra charges. This is because , if the burden will be passed on to the buyers , this will increase the cost of goods , demand being elastic in nature will reduce and the revenue will fall.

To avoid this , the burden will be borne by the seller as the supply will not change being inelastic in nature. This will prevent the demand from falling.

67. Suppose demand for electricity is inelastic, but not
perfectly. A sales tax is imposed, and the tax is levied on buyers.
Draw a graph to show the effects of the tax. Indicate CS, PS, tax
revenue and DWL after tax on your graph.
68. Suppose supply is perfectly inelastic and demand is
relatively elastic. Who bear all the tax burden, buyers or sellers?
Explain in details.

Suppose price elasticity of demand is relatively inelastic for
good X. If the price elasticity of supply for good X is elastic and
an excise tax is imposed on good X, who will bear the greater
burden of the tax?
A. producers
B. both consumers and producers equally
C. government
D. consumers

4.
If Supply and Demand have the normal shapes (not perfectly
elastic or inelastic), a "tax on sellers" (as defined by Mankiw)
will shift demand upward by less than the amount of the tax, and
equlibrium posted price will increase by the same amound as the
tax.
True or False?
6.
If Supply and Demand have the normal shapes (not perfectly
elastic or inelastic), a "tax on sellers" (as defined by Mankiw)
will shift demand upward by the amount of...

What is perfectly elastic demand/supply? Draw a graph to
represent perfectly elastic demand/supply. What is perfectly
inelastic demand/supply? Draw a graph to represent perfectly
elastic demand/supply.

Suppose the elasticity of demand for medicine is very inelastic
and the elasticity of supply for medicine equals 1. A tax on the
sale of medicine will:
burden sellers and buyers relatively equally
burden sellers and their workers more than consumers
burden consumers more than sellers and their workers
not burden consumers or sellers and their workers

10. The relationship between the price elasticity of
demand/supply curves and the tax burden for buyers/sellers. Suppose
buyers are more elastic than sellers. Who is going to bear more tax
burden?

What is perfectly elastic demand/supply? Draw a graph to
represent perfectly elastic demand/supply.
What is perfectly inelastic demand/supply? Draw a graph to
represent perfectly elastic demand/supply.
When the price of t-shirts increases by 12 percent, the quantity
of t-shirts demanded falls by 20 percent. Calculate the price
elasticity of demand. Is the demand for t-shirts elastic,
inelastic, or unit elastic?
When the price of t-shirts falls by 30 percent, the quantity of
t-shirts supplied decreases by 20 percent. Calculate the...

Which of the following sentences about tax incidence is true? I.
If demand is relatively elastic, producers will bear a greater
burden of the tax than consumers. II. If supply is completely
inelastic, producers will bear all the burden of the tax. III. If
the supply curve is completely elastic, consumers will bear none of
the burden of the tax. Group of answer choices II and III only. III
only I, II and III. II only. I and II only.

Are cigarettes relatively demand elastic or demand inelastic?
Explain using the determinants of price elasticity of demand. Does
the burden of cigarette taxes fall more heavily on buyers or
sellers? Explain. Do you think that higher cigarette taxes will
deter more people from smoking?

Suppose the demand and supply curves for a large specialty
pizza are given by:
Qd = 120 – 10P
Qs = -30 + 5P.
Using the demand and supply functions above, the equilibrium
price of a pizza is ____, and the equilibrium quantity is ____.
Illustrate your answer.
Compute Price elasticity of demand and supply at this
equilibrium.
Compute CS and PS and illustrate on a graph.
Suppose that the government decrees that a specialty cannot be
sold above $8....

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