Question & Answer

Dontae stated that he didn’t want to earn any more money because it would “put him in a higher tax bracket.”  What is wrong with Dontae’s reasoning?

One common argument for imposing so-called sin taxes is the social goal of reducing demand for such products.  Using cigarettes as an example, is there a segment of the population that might be sensitive to price and for whom high taxes might discourage purchases?

If the general objective of our tax system is to raise revenue, why does the income tax allow deductions for charitable contributions and retirement plan contributions?

As noted in Example 1-2, tolls, parking meter fees, and annual licensing fees are not considered taxes.  Can you identify other fees that are similar? 

To help pay for the city’s new stadium, the city of Birmingham recently enacted a 1 percent surcharge on hotel rooms. Is this a tax?  Why or why not?

Courtney recently received a speeding ticket on her way to the university.  Her fine was $200.  Is this considered a tax?  Why or why not?

Describe some ways in which taxes affect the political process in the United States.

What are some aspects of business that require knowledge of taxation?  What are some aspects of personal finance that require knowledge of taxation?

Jessica’s friend Zachary once stated that he couldn’t understand why someone would take a tax course.  Why is this a rather naïve view?

Will a general item of expenditure such as food or clothing have a price-elastic or inelastic demand? (Consider both the determinants we have considered so far.)

Why will the price elasticity of demand for holidays in Crete be greater than that for holidays in general? Is this difference the result of a difference in the size of the income effect or the substitution effect? Is there anything the suppliers of holidays in Crete can do to reduce this higher price elasticity?

(Threshold Concept 5) 1. Give two other examples of perverse incentives. How could the incentives be improved?

(Threshold Concept 5) 2. Suppose that the kitchen is very untidy – what are the incentives for you to address this? What incentives could you use to get someone else to do it for you?

(Threshold Concept 5) 3. Many students undertake voluntary work while at university. What do you think the incentives are for this? Identify any perverse incentives associated with volunteering and how they could be addressed.

What will happen to the equilibrium price and quantity of butter in each of the following cases? You should state whether demand or supply (or both) have shifted and in which direction. (In each case assume ceteris paribus.)

(a) A rise in the price of non-dairy spread.

(b) A rise in the demand for cream.

(c) A rise in the price of bread.

(d) A rise in the demand for bread.

(e) An expected rise in the price of butter in the near future.

(f) A tax on butter production.

(g) The invention of a new, but expensive, process for removing all saturated fat from butter, alongside the passing of a law which states that all butter producers must use this process.

What would happen to price and quantity if the demand curve shifted to the left? Draw a diagram to illustrate your answer.

(Threshold Concept 4) 1. If there is a shortage of certain skilled workers in the economy, how will market forces lead to an elimination of the skills shortage?

(Threshold Concept 4) 2. If consumers want more of a product, it is always desirable that market forces result in more being produced?

Explain the process by which the price of houses would rise if there were a shortage.

Looking at the Maths) 1. If P was originally measured in £s, what would happen to the value of the d term if P were now measured in pence?

(Looking at the Maths) 2. Draw the schedule (table) and graph for equation (2) for prices from £1 to £10. What is it in the equation that determines the slope of the supply ‘curve’?

(Looking at the Maths) 3.  Explain why the P and j terms have a positive sign, whereas the a₁ and a₂ terms have a negative sign.

This question is concerned with the supply of oil for central heating. In each case consider whether there is a movement along the supply curve (and in which direction) or a shift in it (and whether left or right).

(a) New oil fields start up in production.

(b) The demand for central heating rises.

(c) The price of gas falls.

(d) Oil companies anticipate an upsurge in demand for centralheating oil.

(e) The demand for petrol rises.

(f) New technology decreases the costs of oil refining.

(g) All oil products become more expensive.

By referring to each of the above determinants of supply, identify what would cause

(a) the supply of potatoes to fall and

(b) the supply of leather to rise.

1. How much would be supplied at a price of 70p per kilo?

2. Draw a supply curve for farmer X. Are the axes drawn to the same scale as in Figure 2.3? 

(Looking at the Maths) 1. Referring to equation (3), if the term a has a value of –50 000 and the term b a value of 0.001, construct a demand schedule with respect to total income (Y). Do this for incomes between £100 million and £300 million at £50 million intervals.

(Looking at the Maths) 2. Now use this schedule to plot a demand curve with respect to income. Comment on its shape.

(Looking at the Maths) 1. Complete the demand schedule in table up to a price of 50.

(Looking at the Maths) 2. What is it about equation (2) that makes the demand curve (a) downward sloping; (b) a straight line?

1. Assume that in Table 2.1 the total market demand for potatoes increases by 20 per cent at each price – due, say, to substantial increases in the prices of bread and rice. Plot the old and the new demand curves for potatoes. Is the new curve parallel to the old one?

2. The price of strawberries rises and yet it is observed that the sales of strawberries increase. Does this mean that the demand curve for blueberries is upward sloping? Explain.

Suppose you asked your favorite AI query tool the following question: “When is an S corporation required to pay a built-in gains tax??”  The AI tool provided the following response:

Suppose you asked your favorite AI query tool the following question: “How do the tax laws treat family members for purposes of limiting the number of owners an S corporation may have?”  The AI tool provided the following response: