uestion 8 You are the manager of medium-sized company that deals in production of make-ups in Ghana. Suppose one morning you heard on the news that the government has imposed a lump sum tax on every unit of make-up sold in the market. a) Using demand and supply analysis, illustrate the effect of the lump sum tax imposed on the make-up market by showing whether there will be a shortage or surplus of make-ups in the market. b) How would you expect the equilibrium price and quantity of make-up to change in the market? c) Suppose during the same period the price of a leading substitute product decreases along with the change the effect of the tax mentioned above, how would you expect the equilibrium price and quantity of make-up to change? Note: Draw a graph to explain your answers.
uestion 8 You are the manager of medium-sized company that deals in production of make-ups in Ghana. Suppose one morning you heard on the news that the government has imposed a lump sum tax on every unit of make-up sold in the market. a) Using demand and supply analysis, illustrate the effect of the lump sum tax imposed on the make-up market by showing whether there will be a shortage or surplus of make-ups in the market. b) How would you expect the equilibrium price and quantity of make-up to change in the market? c) Suppose during the same period the price of a leading substitute product decreases along with the change the effect of the tax mentioned above, how would you expect the equilibrium price and quantity of make-up to change? Note: Draw a graph to explain your answers.
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter5: Elastic And Its Application
Section: Chapter Questions
Problem 6PA: The price of coffee rose sharply last month, while the quantity sold remained the same. Five people...
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Question 8
You are the manager of medium-sized company that deals in production of make-ups in Ghana. Suppose one morning you heard on the news that the government has imposed a lump sum tax on every unit of make-up sold in the market.
a) Using demand and supply analysis, illustrate the effect of the lump sum tax imposed on the make-up market by showing whether there will be a shortage or surplus of make-ups in the market.
b) How would you expect the equilibrium price and quantity of make-up to change in the market?
c) Suppose during the same period the price of a leading substitute product decreases along with the change the effect of the tax mentioned above, how would you expect the equilibrium price and quantity of make-up to change?
Note: Draw a graph to explain your answers.
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