Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 19, Problem 4QP
To determine
Identify the demand elasticity.
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Suppose the current price of gasoline at the pump is $4 per gallon and that 1 million gallons are sold per day. A politician proposes to add a $1 tax to the price of a gallon of gasoline. She says that the tax will generate $1 million in tax revenues per day. Explain the assumption that she is making.
The figure below represents the market for Gasoline, where initially the equilibrium price was $5.60. The picture shows the effect of a $1.50 tax on gasoline. Using the information from the figure, what is the price elasticity of demand(Using the Midpoint method) when moving from equilibrium to the new demand after the tax?(Input the answer in absolute value and round it to 2 decimal places)
Suppose the income elasticity of demand for food is 0.45 and the price elasticity of demand is
- 1.00. Suppose also that Felicia spends $10,000 a year on food, the price of food is $2, and that
her income is $25,000.
If a sales tax on food caused the price of food to increase to $2.50, what would happen to her
consumption of food? Because a large price change is involved, use the arc elasticity to measure
the price elasticity of demand rather than a point elasticity.
Felicia's consumption of food would decrease by 1000.00 units. (Enter your response rounded to
two decimal places.)
Suppose that Felicia gets a tax rebate of $2,500 to ease the effect of the sales tax. What would
her consumption of food be now? (Again, use an arc income elasticity to answer this question
instead of a point income elasticity.)
Felicia's consumption of food would now be 4,175.18 units. (Enter your response rounded to two
decimal places.)
Is she better or worse off when given a rebate equal to the sales tax…
Chapter 19 Solutions
Economics (MindTap Course List)
Ch. 19.1 - On Tuesday, the price and quantity demanded are 7...Ch. 19.1 - What does a price elasticity of demand of 0.39...Ch. 19.1 - Prob. 3STCh. 19.1 - Prob. 4STCh. 19.2 - Prob. 1STCh. 19.2 - Prob. 2STCh. 19.4 - Prob. 1STCh. 19.4 - Prob. 2STCh. 19.4 - Prob. 3STCh. 19.4 - Prob. 4ST
Ch. 19 - Prob. 1QPCh. 19 - For each of the following, identify where demand...Ch. 19 - Prove that price elasticity of demand is not the...Ch. 19 - Prob. 4QPCh. 19 - Prob. 5QPCh. 19 - Suppose a straight-line downward-sloping demand...Ch. 19 - Prob. 7QPCh. 19 - Prob. 8QPCh. 19 - Prob. 9QPCh. 19 - Prob. 10QPCh. 19 - Prob. 11QPCh. 19 - Prob. 12QPCh. 19 - Prob. 13QPCh. 19 - Prob. 14QPCh. 19 - A college raises its annual tuition from 23,000 to...Ch. 19 - As the price of good X rises from 10 to 12, the...Ch. 19 - The quantity demanded of good X rises from 130 to...Ch. 19 - The quantity supplied of a good rises from 120 to...Ch. 19 - Prob. 5WNG
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