To state:
The effect of demand of sunglasses and sunscreens on buyers and sellers when government doubles the tax from 5.5% to 11% in Florida.
Answer to Problem 1SPPA
When tax imposed by the government increases, consumer pay most of the tax. If goods are necessary like life-saving medicines buyers buy those products even the
The tax increase decreases the quantity of sunglass and sunscreen bought by less than half. A new tax will raise the price of the products and demand will decrease.
Explanation of Solution
When a new tax is imposed on the prices of the goods, prices generally go high. In Florida, when the government doubles the tax; the buyers will pay the amount of the tax increased. The demand will go down. Sunglasses and sunscreens are not the very necessary things; hence, the demand will go down. They must pay extra money for sunglasses and sunscreens.
Perfectly elastic demand:
In perfectly elastic demand, consumers buy more things if the prices fall and when the prices go high the demand decreases.
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Chapter 8 Solutions
Foundations of Economics (8th Edition)
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