1. Governments impose taxes for several reasons. The most obvious reason is to raise revenues for th

1. Governments impose taxes for several reasons. The most obvious reason is to raise revenues for the government. If the goal of a government is to raise the maximum revenues, should a per unit tax be imposed on an item that has a price elasticity of demand that is elastic or inelastic. A per unit tax is a tax that is charged as so much per unit of the item sold. An example would be a tax of 42 cents per gallon of gas sold. The tax would be 42 cents a gallon no matter if a gallon of gas had price of $2.00 or $4.00. Explain your answer.2. A second reason the government may impose a tax is to reduce consumption of a good. Such taxes are known as sin taxes. Some argue that we should make some drugs legal and tax them in order to raise tax revenues for the government. The government has decided to place a sin tax on crack. Given what you know about the price elasticity of demand and addictive properties of crack, would you expect a sin tax that raises the price of crack by 15% to decrease the sale of crack by more than or less than 15%? Explain your answer.3. Wal-Mart advertises that it has rolled back prices. IfWal-Mart is rolling back prices to raise revenues, should it roll back prices on products that have a price elasticity of demand that is elastic or inelastic. Explain your answer. 4. When the price of pizza was $10.00 for a medium pizza, students at SUNY Canton consumed 600 pizzas per week. When the price of pizza increased to $15.00 for a medium pizza, students at SUNY Canton consumed 500 pizzas per week. Calculate the price elasticity of demand for medium pizzas for SUNY Canton students. You must show your work to receive credit for your calculation. If the price of pizza increases by 1%, by what will the percentage change in quantity demanded of pizzas for SUNY Canton students?5. Use the information below to calculate a price elasticity of supply. You must show your work to receive credit for this problem. Once you have calculated the price elasticity of supply, state whether it is elastic or inelastic. Given the elasticity you calculated, fill in the blank in the following sentence: A 1% increase in price will cause a _________ percent increase in quantity supplied. PriceQuantity Supplied4.0015.006.0030.00