Considering an excise tax on soda

Assignment Help Business Economics

Reference no: EM131007720

The town you live in is considering an excise tax on soda. It has been estimated the price elasticity of demand is 1.24. You have a friend that believes that tax will just be pushed on to consumers and it is a tax grab by the local government. Explain why your friend may be wrong on both counts using your understanding of price elasticity of demand.

Reference no: EM131007720

Questions Cloud

Passes through the consumption bundle : Jean-Pierre consumes only apples and bananas. He prefers more apples to less, but he gets tired of bananas. If he consumes fewer than 28 bananas per week, he thinks that one banana is a perfect substitute for one apple. The indifference curve that pa..

Free trade is implemented in the local economy : In addition to the positive welfare effects that free trade has on an economy, there are a variety of other benefits of international trade. Without free trade, Sapphira has market power as a local producer. Once free trade is implemented in the loca..

Imposing trade restrictions on imported semiconductors : Suppose there is a policy debate regarding the United States’ imposing trade restrictions on imported semiconductors: A senator from a state with several semiconductor factories argues that the government should impose a tariff on semiconductors beca..

Ompetitive market-consumer surplus and producer surplus : We have learned that under the perfect competitive market, consumer surplus and producer surplus are maximized. Therefore, market is the most efficient. Research and give an example of an incomplete market, discuss why it is inefficient, and illustra..

Considering an excise tax on soda : The town you live in is considering an excise tax on soda. It has been estimated the price elasticity of demand is 1.24. You have a friend that believes that tax will just be pushed on to consumers and it is a tax grab by the local government. Explai..

Calculate the current equilibrium output of this economy : Consider a hypothetical economy without government or international trade. Households spend $0.90 of each additional dollar they earn and save the remaining $0.10. Even when they have no income, they spend $100 in total. Firms plan a total of $150 in..

Explain the short run shut down rule : A firm currently uses 40,000 workers to produce 180,000 units of output per day. The daily wage per worker is $100, and the price of the firm's output is $28. The cost of other variable inputs is $500,000 per day. Calculate the firm’s profit or loss...

Devastating impact on our national economy : In 2009 the American auto industry was in a dire economic state. Chrysler was in Chapter 11, GM was on the brink of bankruptcy, and Ford’s future was at best uncertain. The demise of the U.S. auto industry would have a devastating impact on our natio..

What is the value of lerner index at profit-maximizing price : Rick sells hamburgers, facing no competition the demand for his burgers is: Q=1000-2P, where Q is the quantity of burgers sold per week and P is the price of a given hamburger. Suppose Rick’s monthly cost is given by: TC= 1000+100Q. What is the value..

User Account

All Pages