# Microeconomics Project Part 1

Pages: 2 (389 words) Published: May 16, 2013
ES2550 Microeconomics - OL2-MAR1813

Project Part 1

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Barnes & Noble books which Estimated Elasticity is -4.00 which I believe is elastic because it has a value greater than 1 decrease in quantity demanded is proportionally greater than the increase in price. Coca-Cola which Estimated Elasticity is -1.22 I believe is elastic because it has a greater then 1 Cigarettes which Estimated Elasticity is -0.25 I believe is inelastic because it has less than 1 in absolute value. Beer which Estimated Elasticity is -0.23 I believe is inelastic because it has less than 1 in absolute value. Gasoline which Estimated Elasticity is -0.06 I believe is inelastic because it has less than 1 in absolute value. Explain the implications of those classifications on tax revenue collections when the per-unit tax increases as opposed to decreases. Tax revenue collections will be in the following order:

First is Gasoline then Beer next is Cigarettes then Coca cola lastly Books The more the elasticity the less the revenue collected.
Using those classifications, make some assumptions regarding tax incidence. For instance, will buyers or sellers pay a larger portion of the tax per unit? Explain. Alike the weight on buyers’ tax accepted by them is more for goods that have inelastic demand. Based on the elasticity classifications their effect on tax revenue, and tax incidence, which goods would the government prefer to tax? The Government tax goods with inelastic demand like meats, bread, soft drinks as people will devour for these items in the face of the change in price Part 2:

Research the effect of changes in cigarette taxes on tax revenue for a state. Does this change indicate cigarettes have an elastic or inelastic demand in that state? Support your answer I have chosen Indiana where I am and Illinois and Michigan which are close to Indiana. State and local tobacco tax revenue select years 2008 to 2010 thousand of dollars Indiana 519,871-2008,...