If Elasticity of Demand Is 0

question 169

Multiple Choice

If elasticity of demand is 0.7, elasticity of supply is 0.7, and a 5 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:

Local Industries

Businesses and manufacturing operations that are based within a specific geographic area and often cater to the economic needs of the local population.

Market Development

The expansion of a market through the identification and penetration of new market segments or geographic areas.

Microfinance

A type of financial service provided to unemployed or low-income individuals or groups who otherwise lack access to traditional banking services.

Collateral

An asset that a borrower offers to a lender as a security for a loan, which can be seized if the loan is not repaid.