Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 6: Q 6.4 (page 124)

Explain how the taxes government levy on purchases of goods and services affect market prices and equilibrium quantities.

Short Answer

Expert verified

The taxes levied by the government will greatly affect the market prices and equilibrium quantities.

Step by step solution

01

Step 1. Definition of tax rates.

The proportion of tax base that has to be paid to the government.

02

Step 2. Impact of taxes on equilibrium.

The taxes levied by the government will impact the market prices and quantities. The taxes will increase the market prices and decrease the equilibrium quantity as the market taxes will lead to greater price and the higher the price the lower will be the quantity.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Understand the key factors influencing the relationship between tax rates and the tax revenues governments collect.

The British government recently imposed a unit excise tax of about$154 per ticket on airline tickets for flights to or from London airports. In answering the following questions, assume normally shaped demand and supply curves.

a. Use an appropriate diagram to predict the effects of the ticket tax on the market-clearing price of London airline tickets and on the equilibrium number of flights into and out of London.

b. What do you predict is likely to happen to the equilibrium price of tickets for air flights into and out of cities that are in close proximity to London but are not subject to the new ticket tax? Explain your reasoning.

Given that in recent years, the governments of many nations have been reducing corporate income tax rates in relation to the US rate (which remains one of the world's highest), is the US tax base shrinkage likely to slow down or speed up? Explain.

Why might pressures to satisfy government budget constraints give state governments incentives to seek to tax remote sales even if they were to determine that actual net revenues collected likely would be less than originally estimated?

Aseniorcitizengetsapart-timejobatafast-food

restaurant.Sheearns\(8perhourforeachhoursheworks,andsheworksexactly25hoursperweek.Thus,hertotalpretaxweeklyincomeis\)200.Hertotalincometaxassessmenteachweekis\(40.Shepays\)3intaxesforthefinalhoursheworkseachweek.

a. What is this person's average tax rate each week?

b. What is the marginal tax rate for the last hour

she works each week?
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free