Beer Taxes It is worthwhile to mention that beer drinkers could be divided into two major types. The first type is known as ‘casual drinkers’ who have price elastic demand; therefore, if price increases the quantity demanded reduces. The second type is known as ‘beer addicts’ who are hardcore drinkers so they have price inelastic demand…
The adverse impact of tax hike was phenomenal for casual drinkers as they massively reduced their consumption, thereby resulting in overall decrease in aggregate beer demand. Obviously, the producers were unable to increase prices substantially considering demand / consumption pattern and thus suffered stupendous financial losses. For instance, the producers adopted downsizing strategy, which in turn resulted in 50,000 job losses. The revenues to government also declined in general as the beer industry did not record significant market expansion and growth. The demand from hardcore drinkers also reduced as they switched to other cheap drinks to ensure their balance of their financial budgets. All in all, the rollback of levies / taxes would not lead to mammoth rise in consumption; rather will reduce financial burden on producers as well as consumers. Next, consumers would not change their drinking habit and start consuming irresponsibly; therefore, this is just a myth that rollback of beer taxes may cause grave healthcare issues. Reference Beer Tax Website “Just the Facts” Roll Back the Beer Tax http://www.rollbackthebeertax.com/ ...
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Answer 2 The demand for opera is relatively inelastic for music lovers and entertainment crazy people, whereas the demand is highly elastic for those who have no real interest in opera. The demand for foreign travel is elastic because it is a luxury good and requires a large amount of income to meet expenditures.
Industry when in the infant state is not capable of meeting head-on foreign competition; however, given the time it is capable to flourish and can compete with international players. Short term protection helps industry to develop its comparative advantage.
For instance, when a firm has specialized workers, it could expand its business operations for mass production (economies of scale or large scale operations) because of availability of top quality personnel.
Diminishing returns are observed when a
If fixed costs remain same in this case for both power producers then firm ABC will have cost advantage over firm XYZ because of its extremely high 30 billion productivity level. In other words, firm XYZ will incur greater costs to high contribution of fixed costs in
For example an industry in Mexico due to lower labor cost is able to produce at a much lower price. This company is able to sell goods in Canada at a lower price than what the local industry can provide.
ws a firm to acquire its target profits by charging different prices to its consumers without their knowledge because of the reduced level of transparency (p. 565).
Loss-Leader Pricing Strategy: The strategy occurs whenever a firm imposes reduced prices on the goods of
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