Explain the effect of price elasticities of supply and demand on tax incidence
What will be an ideal response?
If demand is less elastic than supply, buyers pay the larger share of the tax. If supply is less elastic than demand, sellers pay the larger share of the tax.
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If the price of a product falls, that product becomes cheaper and people will want to purchase more of it in place of other goods. This statement best describes:
A) the income effect. B) the substitution effect. C) a complementary good. D) an inferior good.
The utility maximizing consumption bundle for an individual can be found by locating _____
a. the individual's bliss point b. any point on an indifference curve touching the budget constraint c. the highest point on an individual's indifference curve d. the point tangent to an individual's budget constraint