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:

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Business Interests

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Licensing Agreement

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Footwear Company

A business entity that designs, manufactures, markets, and sells shoes and related products.