D)If the demand for unskilled labour were inelastic, would the proposed increase in the minimum wage raise or lower total wage payments to unskilled workers? Would your answer change if the demand for unskilled labour were elastic? EX 6 –After you economics lecture one day, your friend suggests that taxing food would be a good way to raise revenue because the demand for food is quite inelastic. In what sense is taxing food a good way to raise revenue? In what sense is it not a good way to raise revenue? EX 7 –A subsidy is the opposite of a tax. With a 0.50€tax on the buyers of ice cream cornets, the government collects 0.50€for each cornet purchased; with a 0.50€subsidy for the buyers of ice cream cornets, the government pays 0.50€for each cornet purchased. A)Show the effect of a 0.50€per cornet subsidy on the demand curve for ice cream cornets, the effective price paid by consumers, the effective price received by sellers and the quantity of cornets sold.
B)Do the costumers gain or lose from this policy? Do producers gain or lose? Does the government gain or lose? EX 8 - Give an example of a positive production externality and an example of a negative production externality. And give an example of a positive consumption externality and an example of a negative consumption externality. (Different from the ones we have seen in class or in the textbook).
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