Answered step by step
Verified Expert Solution
Question
1 Approved Answer
A province needs to raise money, and the finance minister has a choice of imposing a lump sum sales tax of the same amount on
A province needs to raise money, and the finance minister has a choice of imposing a lump sum sales tax of the same amount on one of two previously untaxed goods, good A and good B. Good A and B currently trade at the same price and quantity in their respective markets. a. Assume both the demand and supply of good A are more price elastic than demand and supply for good B. If the finance minister wants to maximize tax revenue, which good should she tax? If the finance minister wants to minimize deadweight loss, which good should she tax? Explain briefly, you can use a graph to explain. b. Assume demand for good A and good B is identical in terms of price elasticity, but supply for good A is more price inelastic than for good B. If the finance minister wishes to minimize tax burden on producers, which good should she tax? If the finance minister wants to maximize tax revenue, which good should she tax? Explain briefly, you can use a graph to explain. c. Assume supply for good A and good B is identical in terms of price elasticity, but demand for good A is
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started