The Economic Way of Thinking Suggests That If the Government

question 86

Multiple Choice

The economic way of thinking suggests that if the government imposed a $500 tax on owners of red automobiles,

• A) fewer red automobiles would be produced and sold.
• B) more red automobiles would be produced and sold.
• C) there would be no change in the number of red automobiles produced and sold.
• D) red automobiles would cease to exist.

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Definitions:

Normal Goods

Goods for which demand increases as the income of individuals increases.

Income Elasticity of Demand

A gauge for the sensitivity of demand for an item to shifts in the income levels of buyers.

Sapphire Pendant Necklaces

Jewelry items consisting of pendants made from the gemstone sapphire, typically hung on a chain or necklace.

Income Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in consumers' income, expressed as a percentage change in demand divided by the percentage change in income.