User Account

All Pages

Government revenue before and after the tax change

Assignment Help Macroeconomics
Reference no: EM132422604

GingerSnap Cookies sell for $40 per box, of which $10 consists of tax, and 6,666 boxes are sold every year. From previous research, you know that the price elasticity of demand for GingerSnap Cookies is -1.2 (that is 1.2 in absolute value terms). All other cookies sell for $30 per box (which includes $l0 tax), and 4,000 boxes of other cookies are sold every year. The cross-price elasticity of demand for other cookies, with respect to a change in the price of GingerSnap Cookies, is 0.75. The income elasticity of demand is 2.1.

The government raises the tax on GingerSnap Cookies from $10 to $l2 per box all of which is passed through to the consumer in the form of higher prices of GingerSnap Cookies. As the tax is imposed, real income drops by 0.5%. Using the appropriate elasticity measures (price elasticity of demand, income elasticity of demand, and cross price elasticity of demand), calculate the change in total government revenue from the government raising the tax (and hence raising the price).

Required:

Question 1: Calculate the government revenue before and after the tax change. Explain by showing how you calculated the new P's and Q's for GingerSnap and other cookies after the change in tax was levied.

Question 2: Should the government raise the tax? Why or why not? Explain.

Question 3: Characterize the elasticities by types of goods and tell how a different characterization would change the outcome. (Hint: Think logically and set this up correctly for partial credit.)

Reference no: EM132422604

Questions Cloud

Determine the monopolist profit maximizing quantity : Determine the monopolist's profit maximizing quantity, denoted QM, and profitmaximizing price, denoted PM.
Business is a poker game and we are all bluffing assignment : Business is a poker game and we are all bluffing Assignment help and solutions:- Discuss why Goldman Sachs was a disciple of Albert Carr's theory
Calculate the cross-price elasticity of demand for fish : Calculate the cross-price elasticity of demand for fish with respect to chips. Carefully interpret your result.
Assumptions of a perfectly competitive market : List the four assumptions of a perfectly competitive market. What do these assumptions imply about price choices made by perfectly competitive firms?
Government revenue before and after the tax change : Calculate the government revenue before and after the tax change. Explain by showing how you calculated the new P's and Q's for GingerSnap
Research on stakeholder,corporate citizenship assignment : Research on Stakeholder,corporate citizenship Assignment help and solutions:-reputation, corporate governance, or executive compensation.
What is the current us unemployment rate : What is the current U.S. unemployment rate? Find the unemployment rate for the demographic group that best fits a description of you
Explain the difference between implicit and explicit costs : Explain the difference between implicit and explicit costs. Give two examples of when an explicit cost is different from an implicit cost.
Average variable costs of production for juke engineering : 1. Calculate the average variable costs of production for juke engineering. 2. Calculate the value of its monthly total fixed costs.

Reviews

Write a Review

Macroeconomics Questions & Answers

  Inflation targeting be a good policy

Why might it be difficult for the Fed to formally adopt inflation targeting?  Would inflation targeting be a good policy for the Fed in the present economic environment

  In using the taylor rule

In using the Taylor Rule as a guideline for monetary policy, what are the pros and cons of using forecasted values of inflation and output rather than observed values of these variables?

  Describe the present economic crisis situation in europe

Describe the present economic crisis situation in Europe.  Why has it been so difficult for the Europeans to find a solution to this problem?   Comment on what implications the crisis may have for the rest of the world if Europeans are not able to ag..

  Long-term federal government budget problems

Question:. Explain why there are long-term Federal government budget problems. Explain why the base-line forecast of the CBO is misleading.

  Derive and compare demand curve

Question based on Derive and compare demand curve,  Derive Ambrose's demand function for peanuts. How does it compare with Johnny's demand curve for peanuts?

  Problem based on utility function

Problem based on  Utility Function - Problem,  Answer and explain the following using a diagram which is completely labeled.

  Laffer curve : tax rate and tax revenue

Question based on Laffer Curve : Tax Rate and Tax Revenue,  Do raising tax rates necessarily raise tax revenue? What factors affect how tax revenue changes when tax rates change?

  Problem - income elasticity of demand

Problem - Income Elasticity of Demand,  Interpret the following Income Elasticities of Demand (YED) values for the following and state if the good is normal or inferior; YED= +0.5 and YED= -2.5

  Positive balance of payment

Question Positive Balance of Payment: "Things will look good for the US if we could just get to where we are consistently running a positive Balance of Payments."

  Effect of recession on the investment curve

Comment on the effect of a recession on the investment curve (only) and on the level of savings, investment, and the equilibrium real interest rate in the financial crisis that hits United States first starting in fall 2007.

  Affect of falling domestic investment on trade surplus and

How will a fall in domestic investment affect the trade surplus and net capital outflows in the domestic economy, the trade deficit and capital inflows in the rest of the world.

  Crises in the banking sector and bank run

Banking crises crisis decreases depositors' confidence in the banking system. What would be the effect of a rumor about a banking crisis on checkable deposits in such a country?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd