If Elasticity of Demand Is 1

question 94

Multiple Choice

If elasticity of demand is 1.8, elasticity of supply is 0.2, and a 20 percent excise tax is levied on the good:

• A) consumers pay 20 percent of the tax.
• B) sellers pay 20 percent of the tax.
• C) consumers pay 10 percent of the tax.
• D) sellers pay 10 percent of the tax.