I need my assignment 2 ( 3 questions) to be done

1 answer below »
I need my assignment 2 ( 3 questions) to be done
Answered Same DayApr 19, 2020ECO511Charles Sturt University

Answer To: I need my assignment 2 ( 3 questions) to be done

Deepika answered on Apr 21 2020
151 Votes
Student’s Name Student’s No.
Assignment 2
Student’s Name -
Student’s No. -
Tutor’s Name -
Answer 1:
The prices of tobacco and tobacco products are indexed twice a year, once in September and other in March.
The present rate of excise
on a stick of cigarette containing less than 0.8 grams of tobacco is
$ 0.69858 (1/9/2017) to $ 0.71046 (1/3/2018). (Australian Taxation Office, Excise rates for tobacco)
As on 1 January 2018, the excise tax charged on a standard 20 packet of cigarettes is $13.9716 (0.69858 ×20). If the standard pack is sold for a price of $30, the before tax price is $16.0284 (30 – 13.9716). In addition to this, the government announced that excise on tobacco and tobacco products will increase by 12.5 % annually until 2020. This means that in 2020, a packet of cigarette will cost as high as $40. (Metherell. 2016)
Excise tax is imposed to collect revenue and to reduce the demand for a commodity. The overall impact and effect of a tax imposed on the sellers of tobacco products could be assessed by using the tools of demand and supply. The incidence of tax i.e. who bears the final burden of tax depends upon the responsiveness of demand and supply to price changes. Elasticity is the tool which measures how responsive the demand or supply for a commodity is to the change in price. The value of elasticity varies from zero to infinity. Tobacco and tobacco products being addictive goods, have less elastic demand. Tobacco use is most prevalent in the younger age group, as tobacco consumption is supposed to reflect the class and standard of a person. However, the elasticity among such groups is comparatively elastic due to affordability and budget constraints. For our analysis we assume that:
1. Demand for tobacco products is inelastic (Depicted by a steep demand curve)
2. Supply of tobacco products is elastic. (Depicted by a flatter curve)
With the imposition of tax, the supply curve shifts leftwards causing a fall in supply (depicted in Figure 1). As the demand is inelastic, the proportionate fall in quantity demanded is less than the proportionate rise in price. This causes a larger burden of taxation being shared by the buyers (represented by upper bigger blue rectangle). Producers, on the other hand bear much less burden (represented by lower blue rectangle).
Consumer’s Burden
Figure 1 Tax incidence of excise tax on tobacco products
The above analysis implies that when demand is inelastic, a tax is more effective in raising revenue and less effective in reducing consumption.
The imposition of tax on tobacco products is justified on the following grounds:
1. Taxes raise revenue for the government. The revenue thus collected could be put to other productive uses.
2. It discourages smoking which is a demerit good.
3. It saves on the health cost that the state has to incur on those who get ill due to high level consumption of tobacco products.
A study conducted by Sally M Dunlop, Trish F Cotter and Donna A Perez (2011) after the excise hike of 2010, shows that tax hike of 2010 was associated with an rise in the number of smokers making quit attempts and quitting, but this activity was not sustained in the long term.
Answer 2:
(a) Total Cost = Total Fixed Cost + Total Variable Cost
Average cost is calculated by dividing TC by output level. Average fixed cost, as it remains constant at every output level, keeps on falling with rising output. Marginal cost is the cost of producing every additional unit of output.
    Q
    TC (TFC + TVC)
    ATC (TC/Q)
    AFC (TFC/Q)
    TVC (TC – TFC)
    AVC (TVC/Q)
    MC...
SOLUTION.PDF

Answer To This Question Is Available To Download

Related Questions & Answers

More Questions »

Submit New Assignment

Copy and Paste Your Assignment Here