Consider a Good Whose Own Price Elasticity of Demand Is

question 120

Multiple Choice

Consider a good whose own price elasticity of demand is -0.5 and price elasticity of supply is 1.5. The fraction of a specific tax that will be passed through to consumers is:

• A) 0
• B) 0.25
• C) 0.5
• D) 0.75
• E) 1

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Definitions:

Income

Consistent financial returns from professional activities or investments.

Average Tax Rate

The percentage of total income that is paid in taxes, indicating the proportion of an individual's income that is allocated towards taxes.

Taxable Income

The portion of an individual's or corporation's income that is subject to taxes by the government.

Tax Schedule

A chart or formula that outlines the rate of taxation applied to various levels of income or profits.