Asked by Zachary Siegel on Apr 25, 2024
Verified
Refer to Figure 5.7. Had the demand for pumpkins been perfectly inelastic at Point A, the amount customers would have paid per pumpkin after the imposition of this tax would have been
A) $0.
B) $5.50.
C) $7.25.
D) $8.50.
Perfectly Inelastic
A scenario where the demand for a good does not change in response to changes in price, represented by a vertical demand curve.
Excise Tax
A tax charged on specific goods, such as tobacco and alcohol, usually to discourage their use and generate revenue.
Pumpkins
Fruits from the squash family, typically round with a smooth, slightly ribbed skin, and deep yellow to orange color, often associated with Halloween and autumn.
- Evaluate the repercussions of taxes on market operations, paying particular attention to their effects on pricing strategies and the quantities in supply and demand scenarios.
- Explore the role of elasticity in shaping governmental tax revenues and its implications for the tax responsibilities shouldered by producers and consumers.
- Interpret the diagrams depicting supply and demand dynamics, including shifts triggered by taxation.
Verified Answer
RM
Rahel Mohammad7 days ago
Final Answer :
D
Explanation :
With perfectly inelastic demand, consumers bear the full burden of the tax, meaning they would pay the original price plus the entire tax amount. If the original price at Point A plus the tax equals $8.50, that's the amount customers would pay per pumpkin.
Learning Objectives
- Evaluate the repercussions of taxes on market operations, paying particular attention to their effects on pricing strategies and the quantities in supply and demand scenarios.
- Explore the role of elasticity in shaping governmental tax revenues and its implications for the tax responsibilities shouldered by producers and consumers.
- Interpret the diagrams depicting supply and demand dynamics, including shifts triggered by taxation.