Question

Question 1-True/False and Explain 1.The more inelastic the demand, the greater the output decrease of a per unit tax on producers Price Qty True or false 2. If in the future, there are newly discovered health problems associated with Cannabis, the demand will decrease, and some sellers will leave the market. As a result, the price effect on Cannabis is indeterminate but total sales will decrease. Price True or false 3. Because of a trade disagrecment between Canada and Pottsville, Pottsville will no longer be able to purchase ginseng from Canada. As a result, the price of ginseng will increase in Pottsville but decrease in Canada Price Price Canada Qty Pottsville Qty True or false

Answer 1

All graphs below the answers:

1.false, when demand is inelastic then it means that consumers will bear more burden. Eg. Cigarettes, it means that producers can keep on making the goods and tax burden will be passed on to the consumers. fig, 1 shows high change in price on y axis but very less change in quantity on x axis.

2.True, as people will move away from cannabis the total revenue is sure to go down due to ill effects. Demand curve shifts left. Supply also shifts left and quantity traded is less.

3. True In Canada there will shift in supply to right and price will go down and in PottsVille supply shifts to left and price will go up.

4. true, price control in this case is price ceiling in which maximum selling price is set by law. If it is lower then demand is more than supply, gap between demand and supply widens. This creates more price in black markets. As shown 4a, if the ceiled price is very low then demand-supply mismatch is higher and price in black market will be higher, but of it close as shown in fog. 4b then it may not be high.

All graphs:

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