In What Sense Is Taxing Food Is Not A Good Way To Raise Revenue
During the 1990s, technological advance reduced the cost of computer chips. Explain, with the use supply and demand diagrams, how the following markets are affected in terms of prices and quantities.
(a) Computers
As technology advanced a reduction in production costs and more efficient production occurred allowing an increase of production and supply. More businesses seeing the potential opportunity entered the market which in turn increased the supply curve further both resulting in a shift to the right in the supply curve.
(b) Computer software
Computer software is a complementary good to a computer and we see an Inverse relationship with …show more content…
(a) In what sense is taxing food is a ‘good’ way to raise revenue?
Food being inelastic meaning people will always have the need to buy food consumables. Governments would benefit greatly by taxing food as it would be a fast way to raise money.
Inelastic: Suppliers are unable to react quickly to a change in price. Firms also find it harder to implement change in production within certain time parameters.
(b) In what sense is it not a ‘good’ way to raise revenue?
Usually any increase in tax on sellers will typically result in an increase in the market price where both buyer and seller share the tax burden.
Further taxes on food would place a considerable burden on low income families this in turn would have various impacts on their ability to both spend and save which in turn could have a negative impact on the economy.
Elastic: Suppliers can react to change in price. Firms can also find capacity to increase production with ease they may have sufficient in stock to cater current demands therefore there is no time delayed or change in price …show more content…
The in-ability to distribute non-manufacturing costs, like marketing, research and development, over a wider number of products can also be an issue. Trucks may be old and inefficient all these can possibly lead to dis economy of scale.
References
1) Layton. A., Robinson. T., and Tucker. I.B. (2012) Economics for Today. Fourth Asia Pacific Edition, Cengage Learning.
2) 101 Things Everyone Should Know about Economics: A Down and Dirty Guide to Everything from Securities and Derivatives to Interest Rates and Hedge Funds - And What They Mean for You (1-4405-0350-8, 978-1-4405-0350-4), Sander, Peter.
Adams Media Corporation, 2009
3) Riley G, 2012, Revision on Scale Economies and MES, viewed 6th Sep 2012, http://tutor2u.net/blog/index.php/economics/comments/unit-3-micro-revision-on-scale-economies-and-mes
4) Riley G, 2012, AS Markets & Market Systems viewed 6th Sep 2012,
(a) Computers
As technology advanced a reduction in production costs and more efficient production occurred allowing an increase of production and supply. More businesses seeing the potential opportunity entered the market which in turn increased the supply curve further both resulting in a shift to the right in the supply curve.
(b) Computer software
Computer software is a complementary good to a computer and we see an Inverse relationship with …show more content…
(a) In what sense is taxing food is a ‘good’ way to raise revenue?
Food being inelastic meaning people will always have the need to buy food consumables. Governments would benefit greatly by taxing food as it would be a fast way to raise money.
Inelastic: Suppliers are unable to react quickly to a change in price. Firms also find it harder to implement change in production within certain time parameters.
(b) In what sense is it not a ‘good’ way to raise revenue?
Usually any increase in tax on sellers will typically result in an increase in the market price where both buyer and seller share the tax burden.
Further taxes on food would place a considerable burden on low income families this in turn would have various impacts on their ability to both spend and save which in turn could have a negative impact on the economy.
Elastic: Suppliers can react to change in price. Firms can also find capacity to increase production with ease they may have sufficient in stock to cater current demands therefore there is no time delayed or change in price …show more content…
The in-ability to distribute non-manufacturing costs, like marketing, research and development, over a wider number of products can also be an issue. Trucks may be old and inefficient all these can possibly lead to dis economy of scale.
References
1) Layton. A., Robinson. T., and Tucker. I.B. (2012) Economics for Today. Fourth Asia Pacific Edition, Cengage Learning.
2) 101 Things Everyone Should Know about Economics: A Down and Dirty Guide to Everything from Securities and Derivatives to Interest Rates and Hedge Funds - And What They Mean for You (1-4405-0350-8, 978-1-4405-0350-4), Sander, Peter.
Adams Media Corporation, 2009
3) Riley G, 2012, Revision on Scale Economies and MES, viewed 6th Sep 2012, http://tutor2u.net/blog/index.php/economics/comments/unit-3-micro-revision-on-scale-economies-and-mes
4) Riley G, 2012, AS Markets & Market Systems viewed 6th Sep 2012,