A. Given the above stated preference and supply information, how much alcohol (in ounces) will the average consumer purchase in an average month? How much all other goods will this consumer purchase?
B. The program being heavily lobbied by business is to have a tax placed on alcohol such that consumption will be 75 per cent of its original level (i.e., that found in part A. of this problem). How much will such a tax have to be in order to achieve this result? No tax will be placed or increased on all other goods.
C. What are the income and substitution effects of the tax imposed in part B.
D. Incensed by this tax proposal, a coalition of avid "sport" drinkers has formed and decided to lobby Congress to not impose the tax. Assuming s/he would do so, how much would the average person be willing to donate to this lobbying effort? In other words, how much would the average person be willing to pay (in a lump-sum) to avoid having the tax imposed and keep the price of alcohol at its original level?
E. If the tax found in part B is imposed, what is the incidence of the tax? In other words, after the tax how much would the average person have to be compensated in order to make him/her as well off as he/she was prior to the imposition of the tax?
F. If the tax found in part B is imposed, how much would the average person have to be compensated in order to make it possible for him/her to consume the same level of alcohol s/he did prior to the tax? If this person were actually compensated this amount, how much alcohol and all other goods would this person actually consume?
G. To make the tax proposal slightly more palatable to the average consumer, one state legislator has proposed that any amount of tax collected from the average person be rebated to that person. This rebate would take the form of coupons (sometimes called “vouchers”) that the consumer can use to purchase anything except alcohol.
1. What would be the value of the coupons received by the average consumer?
2. If this plan is instituted along with the proposed tax, by how much will the average consumer's alcohol consumption be reduced?
3. Would the average consumer be better or worse off with this plan than (s)he was before any tax/rebate policy was instituted? How much better or worse off? Explain briefly. (You can measure this anyway you wish! You must, however, measure it with a number.)
You did not supply the "above stated preference and supply information"
In any case, before reposting, do some research on your own then take a shot. The Jiskha volunteers want to help guide your thinking and not do the problems for you.
To answer these questions, we would need the "above stated preference and supply information" that you mentioned. Without the specific data, it is not possible to provide accurate answers. However, I can explain the general concepts and steps you would need to follow to solve these questions.
A. To determine how much alcohol the average consumer will purchase in a month, you would need information on individual preferences and the market supply of alcohol. By analyzing consumer demand and the available supply, you can estimate the average consumption of alcohol. Similarly, determining the quantity of all other goods purchased would require data on individual preferences and market supply for those goods.
B. If a tax is imposed on alcohol to reduce consumption to 75% of its original level, you would need to know the original consumption level and the price elasticity of demand for alcohol. Price elasticity measures the responsiveness of quantity demanded to changes in price. By using the elasticity of demand, you can determine the tax rate needed to achieve the desired reduction in consumption.
C. The income and substitution effects of a tax refer to the changes in consumption patterns and purchasing power resulting from the tax. The income effect represents the change in consumption due to a change in real income caused by the tax. The substitution effect reflects the change in consumption due to the relative price change between alcohol and other goods caused by the tax. The specific effects would depend on individual preferences and the magnitude of the tax.
D. To determine how much the average person would be willing to donate to the lobbying effort, you would need to understand individual preferences, willingness to pay, and the perceived impact of the tax. This would involve surveying individuals to gather their preferences and assessing their willingness to contribute financially.
E. The incidence of a tax refers to who ultimately bears the burden of the tax. To determine the incidence after the tax, you would need to analyze the relative price changes, consumer preferences, and demand elasticities of alcohol and other goods. It would require comparing the post-tax consumption levels and the amount of compensation needed to restore individuals' well-being to the pre-tax level.
F. To assess the compensation needed for an individual to consume the same level of alcohol as before the tax, you would need to consider individual preferences, demand elasticities, and the perceived value of alcohol. By estimating the extra compensation required, you can determine the resulting consumption levels of alcohol and other goods.
G. If a tax rebate is implemented, the value of the coupons received by the average consumer would depend on the tax rate and the total tax revenue collected. By dividing the tax revenue by the number of consumers, you can calculate the value of the coupons each consumer receives.
2. The reduction in alcohol consumption resulting from the tax and rebate plan would depend on individual preferences, demand elasticities, and the magnitude of the tax. By considering these factors, you can estimate the change in consumption levels.
3. To determine whether the average consumer is better or worse off with the tax and rebate plan, you would need to assess the overall impact on their welfare. This would involve comparing the benefits from decreased alcohol consumption to the costs of the tax and changes in purchasing power. It would require a comprehensive analysis of individual preferences, welfare measures, and the specific tax and rebate policy details.
Please note that while these explanations provide general guidance on how to approach the questions, the specific answers would require the appropriate data and analytical tools.