06.07.2022 - 11:11

# Consider the market for gasoline. For each of the following, explain what happens to the demand and/or supply of gasoline and the price and quantity exchanged of gasoline. 1. The government imposes a

Question:

Consider the market for gasoline. For each of the following, explain what happens to the demand and/or supply of gasoline and the price and quantity exchanged of gasoline.

1. The government imposes a $2.00/gallon tax on gasoline to fight global warming. 2. The price of crude oil falls. (Gasoline is made from crude oil). 3. Incomes fall due to a recession (gasoline is a normal good). 4. The price of public transportation falls. 5. (a) and (c) simultaneously. 6. (a) and (d) simultaneously. 7. (b) and (c) simultaneously. 8. (b) and (d) simultaneously. Answers (0) • April 17, 2023 в 18:29 a. Sellers will receive a price of P =$540 after the tax is levied. To find this answer, we need to first determine the new demand and supply equations after the tax is levied. The demand equation becomes Q = 1800 - 3(P + 80) = 1680 - 3P, since the tax is added to the consumer's price. The supply equation stays the same, Q = -200 + 2P. To find the equilibrium price, we set the new demand and supply equations equal to each other: 1680 - 3P = -200 + 2P Solving for P: 5P = 1880 P = $376 However, this is the price before the tax is levied. To find the price sellers will receive (after the tax), we subtract the per-unit tax from the equilibrium price:$376 - $80 =$296 And then add this price to the supply equation to find the quantity sold: Q = -200 + 2($296) Q = -200 +$592 Q = 392 Therefore, sellers will receive a price of $540 ($296 + $80 +$164 to cover the tax) for each laptop sold. b. Consumers will pay a price of P = $620 after the tax is levied. This is the consumer's price, which includes the added excise tax of$80. c. Consumers will pay 100% of the excise tax. This is because the demand for laptops is relatively inelastic, meaning that consumers are willing to pay a high price for laptops even after the tax is added. d. Suppliers will pay 0% of the tax. This is because the tax is levied on consumers only, so the suppliers do not bear any of the tax burden.