What does this tell you about price elasticity of demand for cigarettes over this price range i) calculate the new values of the consumer surplus and the producer surplus j) calculate consumer expenditure and producer revenue before and after the tax. • theory of indirect taxes in relation to price elasticity of demand and tax revenues including explanation of likely range of values of ped for yachts and cigarettes. Whenever you are required to decide price variation for maximization of profits, you can use the concept and calculations of price elasticity of demand as well as supply when the demand for the product is elastic to change of price, the increase in price may cause a decrease in profits.
• this pack contains all the content for higher level apart from price elasticity of demand what is the difference between direct and indirect taxes. So, during times of inflation or deflation, why doesn't the government just set prices it sounds reasonable, but price ceilings or floors just don't work. Definitions that appeared since 2005 hl & sl define the following terms indicated in bold in the text indirect taxes (ii) price elasticity of demand (iii) quotas.
For example, if the price of an essential medication changed from $200 to $202, a 1 percent increase, and demand changed from 1,000 units to 995 units, a less than 1 percent decrease, the. In the study, espey examined 101 different studies and found that in the short-run (defined as 1 year or less), the average price-elasticity of demand for gasoline is -026 that is, a 10% hike in the price of gasoline lowers quantity demanded by 26. Higher level assessment outline 24 • determinants of price elasticity of demand • incidence of indirect taxes and subsidies on the producer and consumer.
Demerit goods in contrast to a merit good, consuming a demerit good creates negative spillover effects for example, if a driver consumes excessive alcohol and then crashes into an innocent driver causing damage to their vehicle, a negative consumption externality has arisen. Government intervention this section of the ib economics course examines the three main types of government intervention in the market: indirect taxes, subsidies and price controls each of these government interventions are modelled to show their effects on supply and demand, and the market equilibrium for a good and service. Economics hl- ib price elasticity and indirect taxes q using at least one diagram, explain why knowledge of price elasticity of demand is necessary for a government when they are considering increasing indirect taxes on certain products. 2 when the price elasticity of supply is higher than the price elasticity of demand, an excise tax falls mainly on consumers herriges (isu) ch 7: taxes fall 2010 9 / 25. So we shall again examine indirect taxes when we consider applications of price theory by using both demand and supply curves however, manufacturers and governments do not actually draw demand curves and work out the formula for elasticity.
Eco/wkp(2014)70 7 with respect to the elasticities of corporate income taxes and indirect taxes relative to their bases (profits and consumer spending respectively), the assumption that both have unit elasticities has. Microeconomics: price controls & taxes there are additional indirect costs determining whether the supplier or consumer will pay the tax depends on the elasticity. 2017 economics as - elasticity page it is worthwhile revisiting ped and the impact of an indirect tax and a subsidy, and in particular the. Tax incidence and price elasticity of demand and supply (hl) if a good with inelastic demand is taxed, the tax burden can be easily passed on to the consumer (ped is less than pes) this means the tax burden on the consumer (c) is greater than the tax burden on the producer (p. Day 1: defining elasticity and calculating price elasticity of demand (41,42) questions for the day: 1 explain the concept of price elasticity of demand, understanding that it involves responsiveness of quantity demanded to a change in price, along a given demand curve.
Exam practice: paper 1 (sl and hl) while the price elasticity of supply for 'price controls, like indirect taxes and. Ib economics glossary of terms price elasticity of supply indirect taxation direct taxation ad velorem taxes flat rate taxes. - explain, using diagrams, how the incidence of indirect taxes on consumers and firms differs, depending on the price elasticity of demand on the price elasticity of supply.
Explain, using diagrams, how the incidence of indirect taxes on consumers and firms differs, depending on the price elasticity of demand and on the price elasticity of supply. Ab atkinson, j e stiglitz, indirect taxation and economic efficiency 109 ful result that when the utility function is directly additive, the optimal tax rate depends inversely on the income elasticity of demand. Eco/wkp(2015)93 6 adjusting fiscal balances for the business cycle: new tax and expenditure elasticity estimates for oecd countries by robert wr price, thai-thanh dang and jarmila botev1. Tax incidence and price elasticity of demand and supply (hl only) explain, using diagrams, how the incidence of indirect the effects of an indirect tax in.