1. The United States imposes an excise tax on the sale of domestic airline tickets. Let's assume that in 2013 the total excise tax was $6.10 per airline ticket (consisting of the $3.60 flight segment tax plus the $2.50 September 11 fee). According to data from the Bureau of Transportation Statistics, in 2013, 643 million passengers traveled on domestic airline trips at an average price of $380 per trip. The accompanying table shows the supply and demand schedules for airline trips. The quantity demanded at the average price of $380 is actual data; the rest is hypothetical.
Price of trip Quantity of trips demanded (millions) Quantity of trips supplied (millions)
$380.02 642 699
380.00 643 698
378.00 693 693
373.90 793 643
373.82 913 642
- What is the government tax revenue in 2013 from the excise tax?
- On January 1, 2014, the total excise tax increased to $6.20 per ticket. What is the quantity of tickets transacted now? What is the average ticket price now? What is the 2014 government tax revenue?
- Does this increase in the excise tax increase or decrease government tax revenue?