01:220:102 Lecture Notes - Lecture 11: Whiskey Rebellion, Tax Wedge, Deadweight Loss

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01:220:102 Chapter Notes - Chapter 6: Midpoint Method, Demand Curve, Plus And Minus Signs

01:220:102 Lecture Notes - Lecture 11: Whiskey Rebellion, Tax Wedge, Deadweight Loss

01:220:102 Lecture Notes - Lecture 12: Marginal Utility, Sunk Costs, Marginal Cost

Document Summary

Why taxes matter: washington"s 1791 tax on whiskey distillers led to the whiskey rebellion of. 1794, the decline of small distillers, and local economies. The effect of an excise tax on quantities and prices. Taxes drive wedge between price consumers pay and price sellers receive. Taxes can be levied on seller or consumers. The incidence of tax is who pays it. Taxes on the seller causes the supply curve to move up. Taxes on buyer causes the demand curve to move down. Both situations causes equilibrium to shift to the left. When taxes are imposed, the burden is shared. If the equilibrium is for 80 goods, and an excise tax of is imposed, the sellers receive less and buyers pay more. The incidence of an excise tax doesn"t depend on who officially pay the tax. Both buyer and seller share burden, but its not necessarily and equal burden.

Related Questions

A country that imports a substantial amount of gasoline every year imposed a $1.2 per gallon excise tax on gasoline, to be paid by sellers. The equilibrium price of gasoline prior to the tax was $4 per gallon. Gasoline being a necessary good, its demand curve is steep and the consumers had to bear the bulk of the tax burden. The post-tax price of gasoline went up to $5 per gallon, causing the country's media to claim that it was unfair that people should have to pay so high a price for such an important consumption item. They further believed that such a high tax was inefficient and could not be justified.

Which of the following, if true, would support the media's claim about the tax being inefficient?

sangriaporcupine644

Suppose you are hired by the Martin guitar company as an economic consultant. You estimate the demand for Martin guitars to be Q = 8000 - 2P. Suppose the supply of Martin Guitars is given by Q = -2000 +3P. What is the equilibrium price of Martin guitars?

What is the equilibrium quantity of Martin guitars?
What is the price elasticity of demand at the equilibrium price and quantity?
What is the price elasticity of supply at the equilibrium price and quantity?
For the next seven questions, suppose a per-unit excise tax of $40 per guitar is levied on the consumers.

What price will sellers receive after the tax is levied?
What price will consumers pay after the tax is levied?
What percent of the tax will be paid by the consumers of Martin guitars? (give an answer between 0 and 100)
What percent of the tax will be paid by the suppliers of Martin guitars? (give an answer between 0 and 100)
How many guitars will be sold after the tax is imposed?
How much consumer surplus do consumers get after the tax?
What is the deadweight loss created by this tax?

beigebadger867

1.) An excise tax on a good typically reduces the net price received by the seller. (TRUE/FALSE)

2.) The burden of an excise tax on gasoline falls entirely on consumers of gasoline. (TRUE/FALSE)

3.) Rent controls are one of the few examples of a price floor in market economies. (TRUE/FALSE)

4.) Imposing a price ceiling below the equilibrium price of a good often leads to_____.

A) A greater supply of the good

B) A black market for the good

C) A rightward shift of the supply curve for the good.

D) A leftward shift of the demand curve for the good.

E) All of these

5.) Which of the following is true of price floors and ceilings?

A) Lead to the same price and quantity as in competitive market.

B) Lead to technical efficiency

C) Cause the demand curve to shift left

D) Usually result from government intervention

E) Cause the supply curve to shift right.

6.) Price ceilings often lead to black markets. (TRUE/FALSE)

7.) When minimum wage is above the equilibrium wage what occurs?

A) There will be a shortage of labor

B) There will be no effect on the number of people employed

C) There will be an increase in unemployment rate

D) There will be a decrease in unemployment rate

8.) An excise tax on a good typically reduces the price paid by the consumer (TRUE/FALSE)

9.) If a price ceiling is below the equilibrium price is imposed on a market, it will cause the quantity demanded to rise and the quantity supplied to fall. (TRUE/FALSE)

10.) Price floors often lead to black markets. (TRUE/FALSE)

11.) If an excise tax is imposed on restaurant meals what occurs?

A) Fewer meals will be produced and sold

B) More meals will be produced and sold

C) Market price of the meals will fall

D) Government tax revenue will fall.

mauveyellowjacket715

01:220:102 Lecture Notes - Lecture 11: Whiskey Rebellion, Tax Wedge, Deadweight Loss

01:220:102 Chapter Notes - Chapter 6: Midpoint Method, Demand Curve, Plus And Minus Signs

01:220:102 Lecture Notes - Lecture 11: Whiskey Rebellion, Tax Wedge, Deadweight Loss

01:220:102 Lecture Notes - Lecture 12: Marginal Utility, Sunk Costs, Marginal Cost

Document Summary

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