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You are an assistant to a senator who chairs an ad hoc committee on reforming taxes on telecommunication services

Marketing Jan 09, 2021

You are an assistant to a senator who chairs an ad hoc committee on reforming taxes on telecommunication services. Based on your research, AT&T has spent over $15 million on related paperwork and compliance costs. Moreover, depending on the locale, telecom taxes can amount to as much as 25% of a consumer's phone bill. These high tax rates on telecom services have become quite controversial, due to the fact that the deregulation of the telecom industry has led to a highly competitive market. Your best estimates indicate that based on current tax rates, the monthly market demand for telecommunication services is given by [Math Processing Error]Qd=200−4P and the market supply (including taxes) is [Math Processing Error]Qs=4P−120 (both in millions), where [Math Processing Error]P is the monthly price of the telecommunication services. The senator is considering tax reform that would dramatically cut tax rates, leading to a supply function under the new tax policy of [Math Processing Error]Qs=4.4P−120. How much money per unit would a typical consumer save each month as a result of the proposed legislation?

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