Suppose elasticity of demand is 0.2, elasticity of supply is 0.7, and a 10 percent excise tax is levied on producers. Which of the following changes will reduce the share of the tax paid by consumers?
A. Elasticity of demand falls to 0.1.
B. Nothing will change the burden of the tax.
C. Elasticity of supply falls to 0.3.
D. The tax is increased to 20 percent.
Answer: C
Economics
You might also like to view...
Recent financial turmoil has caused many people to increase saving and to prefer assets that are perceived to be relatively safe and liquid. What are the likely effects on M1 and M2?
What will be an ideal response?
Economics
Capital controls for banks
A) reduce the chance of bank failures. B) have been demonstrated to be effective in preventing financial crises. C) increase the problem of moral hazard. D) increase the profitability of banks.
Economics