Answer:
Wang Company
Statement of financial position
Equity and liabilities
Issued share capital $70,000
Retained earnings $45,000
115,000
Assets
Non-Current assets
Fixed assets $22,000
Current assets
Cash in hand $93,000
$115,000
Wang company
Income statement
Net sales $88,000
Cost of sales $38,000
Gross margin $50,000
Less:admin expenses $5,000
Net Profit $45,0000
Answer:
Price elasticity of demand shows how much a 1% change in the price of a good or services changes the quantity demanded.
In the short run, a 10% increase in price decreases quantity demanded by 4%
PED short run = % change in price / % change in quantity = 4% / 10% = 0.4
PED long run = % change in price / % change in quantity = 7.5% / 10% = 0.75
Both PEDs are inelastic since they are less than 1, which means that an increase in price will result in a proportionally smaller decrease in the quantity demanded. But the PED in the long run is less inelastic, which means that an increase in price will decrease the quantity demanded more in the long than in the short run.
This happens because smokes consider that cigarettes are a basic necessity, so they are willing to purchase them even if the price increases. But as time passes (long run), more smokers will consider that it is not worth paying that much for cigarettes and will probably quit smoking or at least reduce the number of cigarettes they smoke per day.
The correct answer should be
E. Opportunities
The amount of sin tax that will be paid by all of the mentioned parties will depend per country. In fact, in the US, sin tax may even differ per state so the price of consumers and producers will already factor in the percentage of sin tax that they will pay. As to why it will most likely not reduce the consumption, this is because these vices are generally addictive and already serve as habits for some people. Because of this, people will most likely not decrease their consumption significantly since they continuously look for it. In fact, they will be willing to pay more to get it.
