Problem Set 1 Solutions 1. Calculating Taxes. The Herrera Co. had $246‚000 in taxable income. Using the rates from Table 2.3 in the chapter calculate the company’s income taxes. What is the average tax rate? What is the marginal tax rate? The total amount of income tax is 0.15($50‚000 = $7‚500 + 0.25(($75‚000 – 50‚000) = $6‚250 + 0.34(($100‚000 – 75‚000) = $8‚500 + 0.39(($246‚000 – 100‚000) = $56‚940 Total = $79‚190 The average tax rate is the total amount of tax
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Gas Price Elasticity The Energy Information Administration of the Department of Energy began tracking weekly gasoline prices in 1990 by means of a survey of 800 service stations around the country. The average retail price for unleaded gasoline posted its fourth record high during the week of June 12‚ 2000‚ increasing 5 cents a gallon to an average of $1.681. The price at the pump is higher than the same period last year by 56 cents and has risen 16.2 cents over the past month (Anonymous‚ 2000)
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Finding long-term drugs at low prices has been a dilemma for many individuals in the general population. However‚ these set prices—more often than not—are usually seen as obscene and unorthodox due to their low supply compared to such high demand‚ rendering a deficit in quantity demanded for a large number of consumers. As a conflict‚ contrary to what many would hope for‚ a vast number of drugs are not extensive which then cause the pricing methods to be rigorous. More importantly‚ several pricing
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What is the formula for measuring price elasticity of demand? Percentage change in quantity demanded / Percentage change in price When the price elasticity coefficient is less than 1‚ the percentage change in quantity demanded is smaller than the change in price. When the price elasticity coefficient is equal to 1‚ the percentage change in quantity demanded is equal to the change in price. When the price elasticity coefficient is greater than 1‚ the percentage change in quantity demanded
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week‚ but when the bookstore marks them down to $10 it finds that it can sell 50 t-shirts per week. What is the price elasticity of demand for the logo t-shirts? Is the demand elastic or inelastic? Answer Ed = -1.675 (elastic) 2. Check out the following video (http://www.youtube.com/watch?v=ncZkrO06le8). Do the early shoppers appear to have elastic or inelastic demand on Black Friday? Answer Elastic. Very responsive to price changes. 3. In the accompanying table‚ assume that
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Price Elasticity of Supply * Price Elasticity of Supply: * The degree of price elasticity of supply depends on how easily - and therefore quickly - producers can shift resources between alternative uses. Unlike PED‚ there is no Total Revenue Test for Price Elasticity of Supply. * Because there is a direct relationship between Price & Total revenue‚ they always move together. DETERMINANT OF PRICE ELASTICITY OF SUPPLY: TIME! THREE PERIODS: Market period--> short run --> long
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Price Elasticity of Gold Group name: In-Demand The general inverse relationship between price and demand is a key fundamental in economics. A rise in price is known to shrink demand and vice versa. However‚ another important factor in economics is the price elasticity of demand‚ which can be interpreted as the percentage change in demand relative to the percentage change in price. Basic goods tend to be of low elasticity‚ thus the change in price has little effect on demand‚ while luxury goods
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1a) Price elasticity of demand (PED) measures the degree of responsiveness of the quantity demanded of a good to a given change in price of the good itself‚ ceteris paribus. It is found by taking the percentage change in quantity demanded of good X divided by the percentage change in the price of good X. The numerical value of the price elasticity of demand is always negative due to the inverse relationship between quantity demanded and price as stated in the law of demand. When we interpret
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exchange rates are determined 2. The scarcity principle implies that A. people will never be satisfied with what they have B. as wealth increases‚ making choices becomes less necessary C. the prices of scarce goods must rise due to excess demand D. choices must be made and tradeoffs will occur 3. The ’no-free-lunch’ principle is another name for the A. cost-benefit principle B. the scarcity principle C. the ceteris paribus principle D. the marginal (not average) principle
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BUOYANCY AND ELASTICITY: DETERMINANTS OF LOCAL TAX SYSTEM ’S PERFORMANCE By: Julhusin B. Jalisan Civil servants and priests‚ soldiers and ballet-dancers‚ schoolmasters and police constables‚ Greek museums and Gothic steeples‚ civil list and services listthe common seed within which all these fabulous beings slumber in embryo is taxation. Karl Marx Every citizen‚ whether young or old‚ wealthy or poor‚ property owners or property-less‚ pays taxes to help finance governmental functions
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