When Logan Earned $1,000 Per Week, He Purchased 5 Karate

question 115

Multiple Choice

When Logan earned $1,000 per week, he purchased 5 karate lessons and 40 gallons of gasoline. When his earnings increased to $1,100 per week, he purchased 6 karate lessons and 43 gallons of gasoline. The income elasticity of karate lessons and gasoline are _____ and _____, respectively.

• A) 0.50; 1.33
• B) 0.10; 1.6
• C) 2.00; 0.75
• D) 0.85; 0.15

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Definitions:

Burden Of The Tax

The burden of the tax refers to the impact of a tax on the economic welfare of stakeholders, indicating who ultimately bears the cost of the tax.

Elasticity Of Demand

A measure of how much the quantity demanded of a good responds to a change in the price of that good, quantitatively measured as the percentage change in quantity demanded relative to a percentage change in price.

Elasticity Of Supply

A measure of how much the quantity supplied of a good changes in response to a change in its price.

Tax Revenue

It's the income that is collected by governments through taxation.