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Author Question: In Florida, sunscreen and sunglasses are vital items. If the tax on sellers of these items is ... (Read 86 times)

Evvie72

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In Florida, sunscreen and sunglasses are vital items.
 
  If the tax on sellers of these items is doubled from 5.5 percent to 11 percent, who will pay most of the tax increase: the buyer or the seller? Will the tax increase halve the quantity of sunscreen and sunglasses bought?

Question 2

Refer to Figure 4-5. Suppose that instead of a price ceiling, the government imposed a price floor of R1. What is the area representing the portion of consumer surplus transferred to producers as a result of the price floor?
 
  A) A + B B) B C) A D) B + C



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tuate

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Answer to Question 1

Because sunscreen and sunglasses are necessities, the demand for them is inelastic. So, most of a tax imposed on them will be paid by the buyer. Even though the tax doubles, the quantity purchased is not halved because the demand is inelastic.

Answer to Question 2

B




Evvie72

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Reply 2 on: Jun 29, 2018
YES! Correct, THANKS for helping me on my review


marict

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Reply 3 on: Yesterday
:D TYSM

 

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