What does a perfectly elastic demand curve look like? A perfectly inelastic demand curve? Explain
What will be an ideal response?
A perfectly elastic demand curve is horizontal and a perfectly inelastic demand curve is vertical. If the demand curve is vertical, then quantity demanded does not change when price changes, or the elasticity equals 0. Quantity demanded is completely unresponsive to changes in price. If the demand curve is horizontal, a tiny increase in price causes quantity demanded to go to zero. As the percentage change in price approaches zero, elasticity of demand approaches infinity. Quantity demanded is extremely responsive to even very small changes in price.
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Refer to Table 20.1. George is a single taxpayer with an income of $65,000. If George had received a raise of $3,500 at the beginning of the year, his marginal tax rate would be
A) 22.99%. B) 23.75%. C) 38%. D) 95%.
Richard receives government transfer payments and currently consumes five guns and six goose livers. Assume the price of guns decreases by 10% and the price of goose liver increases by 20%
The government raises Richard's transfer payments so he can still afford five guns and six goose livers. Does this constitute a true cost-of-living adjustment? A) No. Richard is overcompensated. B) No. Richard is undercompensated. C) Yes. The payment just achieves the right level of compensation. D) Not enough information.