Tuesday, 9 December 2008

Tax Incidence : Homework

Part A
Page 76 in Anderton shows the extremes of tax incidence.

for homework, draw four diagrams showing these scenarios:
  1. supply is normal ; demand is inelastic
  2. supply is normal ; demand is elastic
  3. demand is normal ; supply is inelastic
  4. demand is normal ; supply is elastic

for each diagram, write an explanation of who ends up paying most of the tax.

Part B

Explain why taxes on cigarettes hit smokers more than they do the peddlars.

Part C

Finish answering the supported choice questions on tax incidence and subsidies.

Keep checking back for part D

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