Question

DIscussion:

Government is known to utilize a product's elasticity measures to set taxes and subsidies. Use this information to set policy on one of the following products: tobacco products, petroleum products, agriculture products, or medical products according to your goal. Research the government's tax/subsidy policy in these areas and any objectives of the tax policy. State your goal, your prescribed action, and why you believe it will work using the information you found.

Response:

The product I would choose to create a policy on is petroleum, due to it’s relative inelasticity and its place as a normal good. My goal in placing taxes on petroleum would be to subsidize clean energy initiatives and the production and purchase of goods that play into that goal. Regarding the inelasticity of petroleum, due to many Americans’ use of motor vehicles personally as well as its use in transporting other goods and relatively few alternatives for plastics used in production of countless goods, a small tax placed on petroleum would not trigger a significant change in the quantity demanded. Some individuals and businesses may try to cut their demand by a little, but their ability to make large rapid changes in their consumption of petroleum products is very limited due to their investment in petroleum powered vehicles and the limited number of alternatives. Outside of major cities public transportation is generally poor or unavailable and many businesses do not have a better alternative than to continue using trucks to transport goods.

Looking at my own state, California, and the taxes put in place there is already a somewhat similar initiative. Instead of money going to subsidize clean energy and fuel alternatives, it is going into road repair which research has shown can lower fuel and repair costs for many Californians. By fixing rough roads passenger vehicles get better fuel mileage, regardless of their fuel type, and drivers spend less on repairs, possibly leading to overall savings for consumers. By increasing fuel mileage, whether it be petroleum or an alternative such as electricity, it also lowers emissions and reduces environmental impact.

Questions:

So, what percentage of tax changes you do expect here and why? Could you add some examples ( sometimes from a different other country), that shows the gains and loses related to such tax applications?

Could someone help me out here in 200 words or so? Thank you.

Answer 1

Answer:

The item I would make a strategy on is oil, because of it's relative inelasticity and its place as a typical decent. My objective in setting charges on oil is finance clean vitality activities and the creation and buy of products that play into that objective.

As to inelasticity of oil, because of numerous Americans' utilization of engine vehicles actually just as its utilization in transporting different merchandise and moderately couple of options for plastics utilized underway of incalculable products, a little duty put on oil would not trigger a critical change in the amount requested.

A few people and organizations may attempt to cut their interest by a bit, however their capacity to roll out vast fast improvements in their utilization of oil based goods is exceptionally constrained because of their interest in oil controlled vehicles and the set number of options.

Outside of significant urban areas open transportation is commonly poor or inaccessible and numerous organizations don't have a superior option than to keep utilizing trucks to transport products.

Taking a gander at my very own state, California, and the expenses set up there is now a to some degree comparable activity. Rather than cash going to finance clean vitality and fuel options, it is going into street fix which look into has demonstrated can bring down fuel and fix costs for some Californians.

By settling unpleasant streets traveler vehicles show signs of improvement fuel mileage, paying little respect to their fuel type, and drivers spend less on fixes, conceivably prompting generally reserve funds for shoppers. By expanding fuel mileage, regardless of whether it be oil or an option, for example, power, it additionally brings down emanations and diminishes ecological effect.