If the Absolute Value of the Tax Elasticity of Supply

question 20

Multiple Choice

If the absolute value of the tax elasticity of supply is 8,a tax cut of 0.5 percent should cause the output supplied to

• A)Increase by 16 percent.
• B)Decrease by 16 percent.
• C)Increase by 4 percent.
• D)Decrease by 4 percent.

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Definitions:

Consumer Surplus

The cleavage between the cumulative amount that consumers are willing to disburse for a good or service and their actual expenditure.

Welfare Economics

The study of how the allocation of resources affects economic well-being.

Consumer Surplus

The difference between the total amount that consumers are willing to pay for a good or service and the total amount that they actually pay.

Consumer Surplus

The rift between the financial input consumers are willing to make for acquiring a good or service and the actual amount they spend.