In each of the following examples, determine whether the price effect or the quantity effect dominates when the tax is applied.a. The government raises taxes on iPods from $10 per iPod to $20 per iPod. Prior to the tax increase, 10 million iPods were sold each year. The new equilibrium quantity is 9 million iPods.b. In response to concerns about chewing gum in schools, the government raises the tax on packs of gum from $0.20 per pack to $0.30 per pack. Before the tax increase, 50 million packs were sold each year. After the tax increase, 40 million packs are sold each year.c. Worried that Americans are addicted to coffee, the government raises the $0.05 tax on a cup of coffee to $0.10. Before the tax increase, 10 billion cups were sold each year. Afterward, 5 billion cups are sold each year.
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