# Microeconomics

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Project part I product | Estimated elasticity | Barnes & Noble books | -4.00 | Coca-Cola | -1.22 | Cigarettes | -0.25 | Beer | -0.23 | Gasoline | -0.06 |
BARNES & NOBLE BOOKS
Barnes & Noble Books are elastic.
The price of elasticity is always negative. In comparing elasticities we are interested in their size. So we drop the minus sign and compare their absolute values.
The estimated elasticity is 4.00 which are greater than the absolute value of 1.00 so this good is elastic.
Since Barnes & Noble Books are elastic a proposed tax increase will have an increase in price which will reduce the total revenue.
Because books are more money people buy less and the distributors share the tax burden which decreases their total revenue + a decrease in sales.
Buyers will pay a larger portion of the tax because it does not matter whether the buyer or seller pays the tax. It is all relative either way they pay the same amount. Relative to the quantity being sold.
COCA-COLA
Coca-Cola is an elastic good.
If demand is elastic then an increase in price due to an increase in taxes will reduce revenue for Coca-Cola. You will then have a decrease in quantity demanded also because this good is a substitute.
Again as in Barnes & Noble Books buyers will pay more tax than the sellers will.
CIGARETTES
Cigarettes are inelastic because they are less than the absolute elasticity value of 1.
Because cigarettes are inelastic an increase in price due to the tax increase will increase total revenue.
Because an increase in tax will cause the quantity of cigarettes to decrease the consumer will not have to pay the full amount of the tax, so the seller also pays. Because the tax paid times the packs sold the consumer pays less tax than the seller.
BEER
Beer is inelastic.
Beer is also subject to an increase in revenue when there is an increase in price....

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