Explain why it is that how much consumers pay for an excise tax depends on how responsive they are to a given change in market price
What will be an ideal response?
If consumers are more responsive to a given change in market price, then the less they will bear the burden of an excise tax and the more producers will bear the burden of the tax. If consumers are more responsive to a change in the market price induced by an excise tax, then the market price will increase by a smaller amount than if consumers are very responsive to the change. The tax burden is effectively the difference between the market prices before and after the imposition of the tax.
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Which of the following does NOT explain why developing countries encouraged new manufacturing industries of their own in the mid 20th century?
A) They were cut off from traditional suppliers of manufactures during WWII. B) Former colonial areas had something to prove; they wanted to attain the same income levels as their former rulers. C) Leaders of these countries feared that their efforts to escape poverty would be doomed if they continues to specialize in primary commodity exports. D) There was political pressure to protect these industries. E) Developing countries ran out of the natural resources that traditionally made up the majority of their trade.
A 10 percent increase in the price of root beer causes a 5 percent increase in the quantity demanded of orange soda. This means that
a. root beer and orange soda are substitutes b. root beer and orange soda are complements c. the cross-price elasticity of demand is elastic d. the cross-price elasticity of demand is equal to 2 e. the cross-price elasticity of demand is equal to -2