Finance 370
NAME: _Martha I Romero Gonzalez ___ DATE: 11/14/2012
CHAPTER EIGHT PROBLEM SET
1. Use the graph below for the following:
a. Shade in the area that represents consumer surplus and label it area A.
b. Shade in the area that represents producer surplus and label it area B.
c. What is the numerical value for consumer surplus?
d. What is the numerical value for producer surplus?
2. Determine what percentage of a tax would be borne by consumers in each of the following situations:
a. Price elasticity of demand is 0.5, and price elasticity of supply is 1.
b. Price elasticity of demand is 0.5, and price elasticity of supply is 0.5.
c. Price elasticity of demand is 1.5, and price elasticity of supply is 0.5.
3. Use either the word elastic or inelastic to complete the following sentences:
a. Deadweight loss with taxes is greater when demand is __________.
b. The amount of surplus transferred from producers to consumers with a price ceiling is greater when supply is __________.
c. Producers are willing to spend more to lobby government’s support for a price floor, or to restrict supply, when demand is __________.
d. Rent controls cause more damage in the long run because, compared to the short-run supply of rental housing, long-run supply is more __________.
e. Luxury taxes do not really hurt buyers of luxuries, because demand for luxuries is __________. 4. Use the graph below for the following:
a. On the graph, demonstrate the effect of a $1 tax on equilibrium quantity and equilibrium price.
b. What is the approximate new equilibrium price of shoes? Why didn’t the price rise by the amount of the tax?
c. Shade the amount of the tax paid by consumers and label it A; shade the amount of the tax paid by producers and label it B.
5. Use the graph below for the following:
[pic]
a. What area represents the
CHAPTER EIGHT PROBLEM SET
1. Use the graph below for the following:
a. Shade in the area that represents consumer surplus and label it area A.
b. Shade in the area that represents producer surplus and label it area B.
c. What is the numerical value for consumer surplus?
d. What is the numerical value for producer surplus?
2. Determine what percentage of a tax would be borne by consumers in each of the following situations:
a. Price elasticity of demand is 0.5, and price elasticity of supply is 1.
b. Price elasticity of demand is 0.5, and price elasticity of supply is 0.5.
c. Price elasticity of demand is 1.5, and price elasticity of supply is 0.5.
3. Use either the word elastic or inelastic to complete the following sentences:
a. Deadweight loss with taxes is greater when demand is __________.
b. The amount of surplus transferred from producers to consumers with a price ceiling is greater when supply is __________.
c. Producers are willing to spend more to lobby government’s support for a price floor, or to restrict supply, when demand is __________.
d. Rent controls cause more damage in the long run because, compared to the short-run supply of rental housing, long-run supply is more __________.
e. Luxury taxes do not really hurt buyers of luxuries, because demand for luxuries is __________. 4. Use the graph below for the following:
a. On the graph, demonstrate the effect of a $1 tax on equilibrium quantity and equilibrium price.
b. What is the approximate new equilibrium price of shoes? Why didn’t the price rise by the amount of the tax?
c. Shade the amount of the tax paid by consumers and label it A; shade the amount of the tax paid by producers and label it B.
5. Use the graph below for the following:
[pic]
a. What area represents the