Supply

1. Briefly discuss the difference between a fixed cost and a variable cost. Give an example of each.

A fixed cost is independent of output which means that no matter how much you produce the cost will always be the same. An example would be the rent on a factory, the cost will always be the same even if you are making more money.

A variable cost is dependent on output which means that the price is based off of something else. An example would be if you are producing a thousand products instead of a hundred then the supply and labor costs would go up which would be considered variable costs.

2. Discuss a supply factor that could lead to more expensive prices for Taco Villa.

A supply factor that would lead to more expensive prices for Taco Villa would be input costs, if the price of a necessary ingredient to make a taco goes up then the taco will cost more money. Another example would be if minimum wage increases, the labor costs require Taco Villa to increase the price to be making a profit.

Demand

1. Why does Bernie sell more hamburgers when they are priced at $1.00 than $5.00?
               Bernie sells more hamburgers when he prices them at $1.00 instead of $5.00 because of the demand schedule. The demand schedule is what people are willing and able to pay for a product at a certain price. In the consumer's mind when the hamburger is priced at $5.00 they decide it's not worth it to them but when Bernie lowers the price to $1.00 they suddenly feel as if it is a great option and a great deal. It's all based on the law of demand, as price goes down, quantity demanded goes up.


2. Why does Bernie sell more hamburgers when they are priced at $5.00 than Sally's sells salads at the same price?
                    Bernie sells more hamburgers then Sally sells salads when they are both price for $5.00 because of the determinants of demand. People's tastes and preferences really contribute to the fact that Bernie is selling more hamburgers then Sally is selling salads. If both are being sold for the same price and the consumer feels as if the hamburgers from Bernie is a better deal then the salads from Sally then they will end up getting the hamburgers from Bernie.

3. Discuss one demand factor that can lead to more entree sales for both Bernie's and Sally's?
            For both Bernie and Sally they should know the law of demand, as price goes down then quantity demanded goes up. If both Bernie and Sally lower their prices further then they can expect their sales to increase. Bernie and Sally should understand that if an item is not a necessity then it will be more price sensitive because consumers aren't hesitant to substitute.

Extra Credit
If demand is elastic, how would a raise in price on a particular good affect total revenue? Discuss one factor that could affect elasticity.
             If demand is elastic which means that it is price sensitive then a raise in price on a particular good could affect the total revenue either way. By raising the price on a particular good, there will be a loss of consumers buying your item but if that loss is made up for in money by the price difference then it is worth it. The problem is that it is a very thin line, you need to calculate how many products are sold at that particular price with the price of the product to make sure that you are not turning your clients away in search for a substitute. If an item is a necessity then it won't be elastic because it is needed no matter the price, but if an item has many substitutes then it will be more elastic.

Flat tax vs. Progressive tax

     Flat tax or progressive tax - the million dollar question. Different people like different taxes but we live in one country under one government and the question is flat or progressive? 

     A progressive tax seems to some like a good idea. Under a progressive tax, the tax rate increases as the income increases - the tax breaks taxpayers into select groups called tax brackets, based off of their income. The tax bracket marginally increases based off of how much more you earn per year. A persons average tax rate will be less than the amount that they marginally pay. Instead you calculate based off of each marginal dollar and the tax bracket that it fits into. But the problems with a progressive tax are far worse then the benefits. A progressive tax pushes the nation’s brightest and most talented individuals with a high earning potential to leave the country to avoid being taxed. A progressive tax also discourages investments and business expansion because the additional profit would be taxed at a higher rate. Therefore many argue that with a progressive tax system there is less motivation to make more money. In some situations a raise can push a person into a higher tax bracket but after being taxed there is no increase in income. One of the most concerning arguments is that a progressive tax is unconstitutional. By raising the tax rate for people earning more money all citizens are not being treated equally. 

     A flat tax on the other hand is much more simple, there is one tax rate that applies to everyone regardless of income. There are no possible deductions, exemptions, or loopholes - all you do is multiply your income times the tax rate. A flat tax would be fairest because everyone would be paying the same ratio of their income. Everyone would be paying their fair share of taxes, in a reasonable way. A flat tax encourages growth and investment, because additional profit would not be taxed at a higher rate. A flat tax would be fair to all and wouldn’t punish the productive by taxing them higher when they are working harder for their money. Just because you make more money that doesn’t mean that more money should be taken from you. 

    After hearing both sides of the spectrum - progressive and flat tax - the answer should be obvious. A progressive tax doesn’t benefit the productive and encourages laziness while a flat tax is the simplest, fairest, and obvious answer.