List
three examples of positive economic analysis and three examples of normative
analysis associated with the imposition of a new tobacco tax.
Your Answer:
Some subjects of positive
analysis include
1) explanation of how the tax will affect the purchase of
tobacco;
2) predictions about the impact of the tax on the price and quantity
exchanged in the market as well as in the markets for related goods;
3) numerical
estimates about the impact of the tax on consumers and producers.
Possible subjects of
normative analysis include
1) What are the sources and uses of revenue
associated with the tax, i.e. who pays and who benefits?
2) Is the tax
equitable? Do people in similar situations pay about the same amount of tax?
3)
Is the tax fair? Is the amount of tax proportional to the willingness of
tobacco users to pay?
4) Will the tax be shifted to one group who will bear
most of the tax burden?
5) How does this tax compare to other tax choices?
Source: Pindyck /
Rubinfeld, Microeconomics, 7th edition, Pearson
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