Principles_HWsolution_ch8

Principles_HWsolution_ch8 - Suggested Answers for Mankiw,...

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1 Suggested Answers for Mankiw, Chapter 8, Problem 2, 6, 10, 12. 2. a. The statement, "If the government taxes land, wealthy landowners will pass the tax on to their poorer renters," is incorrect. With a tax on land, landowners cannot pass the tax on. Because the supply curve of land is perfectly inelastic, landowners bear the entire burden of the tax. Renters will not be affected at all. b. The statement, "If the government taxes apartment buildings, wealthy landowners will pass the tax on to their poorer renters," is partially correct. With a tax on apartment buildings, landowners can pass the tax on more easily, though the extent to which they do this depends on the elasticities of supply and demand. In this case, the tax is a direct addition to the cost of rental units, so the supply curve will shift up by the amount of the tax. The tax will be shared by renters and landowners, depending on the elasticities of demand and supply. 6.
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This note was uploaded on 04/23/2010 for the course ECONOMICS 2312 taught by Professor William during the Spring '09 term at 東京大学.

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Principles_HWsolution_ch8 - Suggested Answers for Mankiw,...

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