Suppose the market for grass seed is expressed as Demand: QD = 100 - 2p Supply: QS = 3p Price elasticity of supply is constant at 1. If the supply curve is changed to Q = 8p, price elasticity of supply is still constant at 1. Yet, with the new supply curve, consumers pay a larger share of a specific tax. Why?
What will be an ideal response?
Even though the elasticity of supply has not changed, the new supply curve intersects the old demand curve at a lower price where demand is relatively less elastic than at the higher price. Since the incidence of a specific tax on consumers is n/(n - e), where n is the price elasticity of supply and e is the price elasticity of demand, therefore when e increases (less elastic demand), the consumers' tax incidence is higher.
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Because collective action problems are ________ to solve, society often ________
A) relatively easy; handles the problems itself B) relatively easy; ignores the problems C) impossible; chooses to live with the problems D) difficult; requests help from the government
The regulation of the prices charged by insurance companies is known as
A) the Federal Register. B) social regulation. C) the market share test. D) economic regulation.