EXERCISES FOR LECTURE 09 Problem 1 The market for sandals has price elasticity of demand as - 62, and of supply as 1-. Sandal price is measured at VND thousand per pair, and its purchased quantity at thousands of pair. (Assuming the elasticity is constant along the demand and supply curves). When a unit tax of VND 7,000/pair is levied on the sandal producers, a market research institute has an estimate that purchased quantity of sandals has been reduced by 165 percent from the current quantity of 1.2 million pairs. Calculate: 1. Pre-tax gross sales, post-tax gross sale and net sale of the sandal producers. 2 . Tax burden born by consumers, producers and total tax revenue for the government. 3 . Deadweight loss from consumers' and producers' sides, and total social deadweight loss. Problem 2: Shoe market is perfectly competitive with price elasticity of demand & as - 0.8 and of supply ES as 1.6 (assuming that the elasticity is constant along the demand or supply curve). Pre-tax equilibrium of quantity is 400,000 pairs of shoes sold at the market price of USD 10 per pair. After a unit tax is levied on shoe seller, the consumed quantity falls to 300,000 pairs. (a) What is the sellers' pre-tax gross revenue? (b) What is after-tax price paid by the buyers, received by the sellers and tax rate imposed? (c) What is tax burden born in the buyers, the sellers, and total tax revenue paid to the government ? (d) What is after-tax gross and net-from-tax revenue enjoyed by the sellers? (e) What is deadweight loss suffered by the buyers, the sellers and the society? Problem 3: According to the current Law on personal income tax, the first USD 5,000 in an individual's income will be tax-exempted. For the income level above USD 5,000 to USD 10,000, a tax rate of 10%; from above USD 10,000 to USD 15,000 a tax rate of 20%; and from above USD 15,000, the tax rate of 30% are applied respectively. How much tax a person with income of USD 35,000 must pay