*Instructions: Please review the attachments before proceeding to answering questions. Answer each question (except #4) with a minimum of 100 word-count. Provide analysis and support your answers with a minimum of 2 outside scholarly articles. Must use the reference I attached as an additional source, here is the reference for it: Sexton, R. (2013). Exploring Economics (6th ed.). Mason: South-Western CENGAGE Learning. NO PLAGIARISM please, I will check. Let me know if you have any questions or comments.
1. Review Slides 10-12 in your Attend section. Suppose a local coffee shop knows that its elasticity of demand is 0.2. Would you recommend that the coffee shop increase its price by 20%? Why or why not?
2. Review Slides 10-12 in your Attend section. Suppose a cigarette manufacturer knows that its elasticity of demand is 1.3. Would you recommend that they raise price by 20%? Why or why not?
3. Would government be better off taxing gasoline or Nike tennis shoes? Use the concept of elasticity (or inelasticity) of demand to defend your choice.
4. Define the following:
a. Consumer surplus
b. Producer surplus
c. Total welfare
d. Deadweight loss
5. Refer to Slide 18 in the Attend section. Explain the effects of a tax on consumer and producer surplus. Explain what happens to total welfare when government levies a per-unit tax on a good. Use the concept of deadweight loss in your explanation.
6. What are the two characteristics that must be met for a good to be considered a “public good?” Give an example of the “free rider” problem and explain why the good or service is subject to this problem.