2007, compared with a 13% decline I other developed countries. Worried about excessive drinking among young people, the British government increased the tax on beer by 42% from 2008 to 2012. Does a specific tax substantially reduce the equilibrium quantity of alcohol?Answer in terms of slops of the demand and supply curve. A specific Tax on consumer: Will substantially reduce the equilibrium quantity of alcohol if supply is relatively horizontal. If the government collects a $1 specific tax, what share of the tax is paid by consumers and firms in each of the following cases? Explain why..What is the effect of a $1 specific tax collected from producers on equilibrium price and quantity if demand is vertical? -Price increases by $1 and quantity is unchanged, so the incidence of the tax that falls on consumers is 100 percent. What is the effect of a $1 specific tax collected from producers on equilibrium price and quantity if supply is horizontal? -Price increases by $1 and quantity decreases, so the incidence of the tax that falls on consumers is 100 percent. Quebec, Canada offers a per child subsidy on day care for young children that lowers the price to $7 per child as of 2011. What is the effect of this subsidy on the equilibrium price and quanity? Assume the day care subsidy is paid to parents. Consider the market for day care illustrated in the figure below.
The new equilibrium price of the daycare is higher and the new equilibrium quantity of day care is higher. For which of the following industries is the supply and demand model likely to most accurate? The supply and demand model will most closely mirror reality for: Agriculture, real estate, financial products, retail trade, wholesale tradeIt is appropriate to use the supply and demand model if, in a market:-Firms sell identical products-Everyone is a price taker with full information about the price and quality of the good-Costs of trading are lowThe supply and demand model is appropriate for analysis under certain conditions. Consumers and firms are known as price takers only if-They cannot affect the market price. During the spring and summer of 2008 when gasoline prices were rising quickly, politicians in several countries proposed a moratorium on some or all gasoline taxes to help consumers. In the US, John McCain, the Republican candidate for President, proposed suspending the federal gasoline tax of 18.4 cents for the summer when demand tends to be higher. Hillary Clinton, while an active candidate for the Democratic nomination for the President, also pushed this plan. In the UK, Prime Minister John Major proposed delaying a 2p rise in a fuel tax until the fall. How would these short-run policies have affected the prices consumer pay in these countries if the policies had been enacted? Temporarily suspending or delaying fuel taxes that consumers pay would: -Shift the demand curve up by an amount equal to the size of the suspended tax. According to the Law of Demand, the demand curve for a good will:
-Slope downwardAn increase in the price of a good will lead to: -A movement up along the demand curve for that good. An increase in consumer’s income will lead to: -A leftward shift of the demand curve for an inferior goodConsider the demand for avocados. Does an increase in average income cause a shift of the demand curve for avocados or a movement along the demand curve? An increase in average income causes: A shift of the avocado demand curve because only a change in the price of avocados causes a movementalong the avocado demand curve. Identify whether the indicated event influences the demand or supply side of the relevant market.
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