Holooly Plus Logo
Holooly Plus Logo

Question 3.5.2: Why would a consumer’s demand for a supermarket product chan...

Why would a consumer’s demand for a supermarket product change when the product price is quoted inclusive of taxes rather than before tax? Is the same effect as likely for people buying a car?

The "Step-by-Step Explanation" refers to a detailed and sequential breakdown of the solution or reasoning behind the answer. This comprehensive explanation walks through each step of the answer, offering you clarity and understanding.
Our explanations are based on the best information we have, but they may not always be right or fit every situation.
The Blue Check Mark means that this solution has been answered and checked by an expert. This guarantees that the final answer is accurate.
Learn more on how we answer questions.

This Question has been Answered.

Subscribe

Already have an account?

Login

Related Answered Questions

In the summer of 2012, due to plentiful lobsters,the price of lobster in Maine fell to $1.25 a pound, which was 70% below normal and nearly a 30-year low. According to Bill Adler, head of the Massachusetts Lobstermen’s Association, “Anything under $4 [a pound], lobstermen can’t make any money”

Verified Answer:
Some lobstermen stayed in port because the price w...

West Virginians who live near the border with other states can shop on either side of the border. When a 6% food tax was imposed in West Virginia, if West Virginians bought food in West Virginia, their total cost was the price of the food plus the tax. If they bought across the border in states that

Verified Answer:
After West Virginia imposed a food tax, it was les...

Vasco likes spare ribs, q1, and fried chicken, q2. His utility function is U = 10q1^2 q2. His weekly income is $90, which he spends on ribs and chicken only.     a. If he pays $10 for a slab of ribs and $5 for a chicken, what is his optimal consumption bundle? Show his budget line, indifference

Verified Answer:
Vasco determines his optimal bundle by equating th...

David’s utility function is U = q1 + 2q2. Describe his optimal bundle in terms of the prices of q1 and q2.

Verified Answer:
David’s marginal utility of q_{1} i...

Andy purchases only two goods, apples (q1) and kumquats (q2). He has an income of $40 and can buy apples at $2 per pound and kumquats at $4 per pound. His utility function is U(q1, q2) = 3q1 + 5q2. What is his marginal utility for apples, and what is his marginal utility for kumquats? What bundle

Verified Answer:
Andy’s marginal utility of apples divided by the p...

Arthur spends his income on bread and chocolate.He views chocolate as a good but is neutral about bread, in that he doesn’t care if he consumes it or not. Draw his indifference map.

Verified Answer:
If the neutral product is on the vertical axis, th...

Sofia will consume hot dogs only with whipped cream. Show her preference map. What is her utility function?

Verified Answer:
Sofia’s indifference curves are right angles (as i...

Suppose we calculate the MRS at a particular bundle for a consumer whose utility function is U(q1, q2). If we use a positive monotonic transformation, F, to obtain a new utility function, V(q1, q2) = F(U(q1, q2)), then this new utility function contains the same information about the consumer’s

Verified Answer:
Given the original utility function, U, the consum...

What is the effect of a 50% income tax on Dale’s budget line and opportunity set?

Verified Answer:
Suppose that Dale purchases two goods at prices [l...

Governments frequently limit how much of a good a consumer can buy. During emergencies, governments may ration “essential” goods such as water, food, and gasoline rather than let their prices rise. Suppose that the government rations water, setting quotas on how much a consumer can purchase. If a

Verified Answer:
In the figure on the next page, the consumer can a...