One form of economic stimulus that state governments can use is to exempt certain types of purchases from state sales tax
For example, a law that permanently exempts business equipment from state sales tax may stimulate purchases of these goods because the law effectively reduces the price of the equipment. Business equipment such as computers or vehicles are durable goods, so should we expect the tax exemption program to have more impact on equipment demand in the short run or long run? A) More impact in the long run because business equipment demand becomes more income elastic in the long run
B) More impact in the long run because business equipment demand becomes more price elastic in the long run
C) More impact in the short run because business equipment demand becomes more income elastic in the long run
D) More impact in the short run because business equipment demand becomes more price inelastic in the long run
D
You might also like to view...
McDonald's and its major competitors compete based:
A) only on the price. B) only on the basis of product characteristics. C) on both the price and product characteristics. D) none of the above because the fast-food industry is perfectly competitive.
Price ceilings can result in a net loss in consumer surplus when the ________ curve is ________
A) demand; very elastic B) demand; very inelastic C) supply; very inelastic D) none of the above; price ceilings always increase consumer surplus