Suppose the Price Elasticity of Demand Is Relatively Elastic and the Price

question 255

Multiple Choice

Suppose the price elasticity of demand is relatively elastic and the price elasticity of supply is relatively inelastic in a specific market.If an excise tax is imposed on this good,who will bear the greater burden of the tax?

• A)consumers
• B)producers
• C)both consumers and producers equally
• D)government

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Definitions:

Substitution

The act of replacing one thing with another, especially a similar item, in response to changes in market conditions or personal preferences.

Convex Preferences

In microeconomics, a condition where consumers prefer a mix of goods over having only one good, illustrated by a convex shape of their indifference curves.

Centered

In a general context, it means being in the middle or at the heart of something; in mathematics, it can refer to the process of adjusting data points or a distribution so that its mean equals zero.

Convex Preferences

Refers to a situation in economics where a consumer prefers a mix or combination of goods over having all of one good, demonstrating a desire for diversity in consumption.