question archive 1)Suppose that in Canada the government places a $1,500 tax on the sellers of new snowmobiles
1)Suppose that in Canada the government places a $1,500 tax on the sellers of new snowmobiles
Subject:EconomicsPrice:2.88 Bought3
1)Suppose that in Canada the government places a $1,500 tax on the sellers of new snowmobiles. After the sale of a new snowmobile, a seller must pay the government $1,500. How would the imposition of the tax on sellers affect market price of snowmobiles?
a. The price will increase by $1,500
b. The price won't change
c. The price will increase by more than $1,500
d. The price will decrease by less than $1,500
2)Jill Borts believes that the price elasticity of demand for her economics textbook is relatively inelastic. She argues, "I was told I had to purchase a book written by Hubbard and O'Brien that is required by my instructor. If I wanted to buy a mystery novel, I would have many authors to choose from. Therefore, the demand for mystery novels is more elastic than the demand for my textbook." Is Jill correct?
a. The demand for the textbook is more inelastic, but Jill's reasoning is incorrect. The reason the textbook has an inelastic demand is that it is more expensive than any novel.
b. She is confused. She should have concluded that the textbook has a more elastic demand than a novel.
c. She is correct.
d. She is correct that the textbook has a more inelastic demand, but that is because most students pay for their textbooks with credit or debit cards. Most people pay for novels other books with cash or by check.
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
1). With the imposition of the tax by the government o the sellers of new snowmobiles the prices of the snowmobiles will increase. The correct option is (a) from the above question that is the prices will increase by $1500. This is due to the fact that the increase in taxes increases the prices and a decrease in tax rate reduces the prices of the commodity as well.
2). Jill is correct in her analysis. The demand for Economics textbook is relatively inelastic as compared to the demand for mystery novels. This is due to the fact that in the case of mystery novels, many options will be available with Jill to choose from whereas in the case of her Economics textbook only one option is available. With the increase in price of one mystery novel Jill will shift to buying another novel, hence the demand curve is elastic. Whereas with increase in prices of textbook Jill will not shift for another textbook as she has to buy the textbook of the same author.
