Suppose That the Demand for Apples Is Perfectly Elastic and the Government

question 42

Essay

Suppose that the demand for apples is perfectly elastic and the government levies a tax on apple producers.Assume that the supply of apples is neither perfectly elastic nor perfectly inelastic.
(a)How will the price paid by consumers change? Is this change bigger or smaller than the price change that would result if the demand for apples were not perfectly elastic?
(b)How will the quantity of apples consumed change because of the tax? Is this change in quantity larger or smaller than the change that would result if the demand for apples were not perfectly elastic?
(c)Explain the significance of your answers in both part (a)and part (b)in terms of how the tax affects the welfare of consumers in the apple market.

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Definitions:

Reproductive Structure

Any part of a plant or animal designed specifically for sexual or asexual reproduction, such as flowers or reproductive organs.

Shoot System

Aboveground portion of a plant consisting of the stem, leaves, and flowers.

Xylem

Vascular tissue in plants that transports water and dissolved minerals from the roots to the rest of the plant.

Ancient Trees

Very old trees, often centuries or millennia in age, which can provide historical and environmental insights.