If Elasticity of Demand Is 0

question 34

Multiple Choice

If elasticity of demand is 0.2, elasticity of supply is 0.5, and a 10 percent excise tax is levied on the good:

• A) the tax burden on suppliers will be greater.
• B) the tax burden on consumers will be greater.
• C) the tax burden will be the same for both.
• D) one cannot say who will bear the greater burden without knowing the tax.

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Definitions:

Fiscal Year

A 12-month cycle utilized for the purposes of financial statements and planning budgets, not necessarily coinciding with the calendar year.

Standard Variances

Differences between planned or standard costs and actual costs in budgeting and accounting, used to monitor and control operational performance.

Principle of Exceptions

The principle of exceptions is a management concept focusing on identifying and dealing with cases that deviate from the normal operation or standards, thus streamlining processes and oversight.

Standard Costs

Predetermined costs for manufacturing or acquiring products, used as a benchmark to compare with actual production costs for budgeting and performance evaluation.