The demand for rutabagas is Q = 2,000 – 100P and the supply of rutabagas is Q = –100 + 200P. Who bears the statutory incidence of a $2 per unit tax on the sale of rutabagas? Who bears the economic incidence of this tax?
Answer to relevant QuestionsThe demand for rutabagas is still Q = 2,000 – 100P and the supply is still Q = –100 + 200P, as in Question 2. Governor Sloop decides that instead of imposing the $2 sales tax described in Question 2, the government will ...Why can some taxes that appear to be regressive in terms of current income be thought of as progressive from a lifetime tax incidence perspective? The city of Malaise is considering a 10% tax on the revenues of all hotels/motels inside the city limits. Although not completely different from hotels and motels in the nearby suburbs, the ones in Malaise have a distinct ...Luxury goods often have much higher elasticities of demand than do goods purchased by a broad base of people. Why, then, are governments more likely to tax luxuries than these “staple” goods? The government of Granita is thinking about imposing a very small tax on one or more of the following goods: anvils, books, and cardigans. Anvils and books are both produced in competitive markets with constant marginal ...
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