The Demand for Insulin Is Quite Inelastic

question 60

Multiple Choice

The demand for insulin is quite inelastic. The demand for Pepsi is quite elastic. Suppose the elasticity of supply for insulin is the same as the elasticity of supply for Pepsi. If a $0.20 tax was imposed on each of these goods (holding everything else constant) , which consumers would pay more of the tax?

• A) There would be no difference in the amount of tax paid by the consumers.
• B) The Pepsi consumers.
• C) More information is needed to determine which consumers pay more of the tax.
• D) The insulin consumers.
• E) The premise of the question is wrong because the elasticity of demand and the incidence of a tax are not related.

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