Author Question: In Florida, sunscreen and sunglasses are vital items. If the tax on sellers of these items is ... (Read 108 times)

Evvie72 · **on:** Jun 29, 2018

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

tuate · **Reply #1 on:** Jun 29, 2018

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