If Elasticity of Demand Is 1

question 88

Multiple Choice

If elasticity of demand is 1.8, elasticity of supply is 0.7, and a 20 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:

Debt Issue

The raising of funds through the sale of bonds, notes, or other forms of debt to investors.

ROE

Return on Equity, a measure of financial performance calculated by dividing net income by shareholders' equity.

Capital Structure

The mix of debt and equity financing used by a company to finance its overall operations and growth.

Expected State

Refers to the predicted condition or status of an entity or economy based on current trends or models.