A Microeconomics question (1 Viewer)

[rumour]

I would have put this in the ANU section, but I don't think many people from ANU Microeconomics 1101 are on BOS.

Question:
The government recently considered introducing a "fat tax" on the consumption of fast food. Is the following statement true or false: The more inelastic the demand for fast food, the smaller the fall in quantity demanded and the greater the tax revenue.

I'm not quite sure about the tax revenue part otherwise I would have said that the statement is true. Being inelastic wouldn't it mean that consumers paid more of the tax, but the government would still get the same amount of tax revenue?

 

[noneother]

I would have put this in the ANU section, but I don't think many people from ANU Microeconomics 1101 are on BOS.

Question:
The government recently considered introducing a "fat tax" on the consumption of fast food. Is the following statement true or false: The more inelastic the demand for fast food, the smaller the fall in quantity demanded and the greater the tax revenue.

I'm not quite sure about the tax revenue part otherwise I would have said that the statement is true. Being inelastic wouldn't it mean that consumers paid more of the tax, but the government would still get the same amount of tax revenue?

Hey I didn't know you do micro1101..Jane Golley lecturer right?
I think the key word here is 'the more' (i.e. if the gradient increases for the demand). So its a comparison of an elastic demand with an inelastic demand, assuming supply curve is constant. So there is an increase in tax revenue, therefore TRUE.
Someone correct me if i'm wrong but this is the way i interpreted this question.

oh god i'd better start cramming for micro and law...fucking hell what am i doing on BoS!

 

[rumour]

Yeah I have Jane!!!!!

Can you actually explain it a bit more?

 

[noneother]

pulling an all nighter? I surely am.

compare two graphs one that has elastic dmd (fig. 1) and the other inelastic dmd (fig 2) however supply is constant slope. Remember the wedge? Set a pt say an arbitary value at Qt, make this value the same for both graphs. by looking at these two you should observe the vertical distance between dmd and supply for fig 1 is shorter than fig 2. thus there is more tax gained.
ask if you need more explanantion...my mind is feeling numb right now

 

[noneother]

Rumour I need to ask what Jane ment when she said chapter 13 is not covered although the relevant sections are included in monopoly and labour markets?! this doesn't make sense to me are parts of chapter 13 included?

 

[rumour]

I think she meant that we didn't cover chapter 13 because we already talked about parts of it in other topics. We have talked about market regulation and competition policy in other topics, so we don't need to learn them specifically. Does that make sense?

 

[Demandred]

True. You can charge a higher price on inelastic goods without worrying a large drop in demand.

 

[loquasagacious]

True.

If you draw a diagram you'll see that even a large price hike will only decrease demand slightly. Therefore you can see via colouring in lol that expenditure is increased and similarily the tax can be depicted on the SD diagram and can be soon to be magnitudinally larger than if the demand were more elastic.

Fuck off studying for Micro till tomorrow... I have to learn EMET1001.

 

[rumour]

I knew I'm goin to fail the EMET exam so I'm not going to study for it now!!!!!

 

[Eagles]

pulling an all nighter? I surely am.

compare two graphs one that has elastic dmd (fig. 1) and the other inelastic dmd (fig 2) however supply is constant slope. Remember the wedge? Set a pt say an arbitary value at Qt, make this value the same for both graphs. by looking at these two you should observe the vertical distance between dmd and supply for fig 1 is shorter than fig 2. thus there is more tax gained.
ask if you need more explanantion...my mind is feeling numb right now

Could u also say that more goods will be taxed (for inelastic) thus more revenue?

 

[Sarah168]

holding supply and the tax rate constant, the qty transacted (regardless of tax incidence) is higher with inelastic demand, therefore govt rev is greater.

Remember that govt revenue depends on two things: the tax rate (in this case, constant) and the qty transacted in the market. The fall in qty traded is LESS in the case of inelastic demand (you are less sensitive to price changes). This is why govt tax revenue is greater relatively.

 

[rumour]

Noneother- have you seen the examinable course content page which is on webct?
It says that the relevant parts of chapter 13 will be included in Monopoly & Labour Markets.

 

[noneother]

yeah i checked it out later. how y'all go on the exam?

 

[rumour]

yeah i checked it out later. how y'all go on the exam?

Shit!!!!!!!
I was freaking out, but the questions were not that bad. I'm sure Emet will be a killer though.....