Suppose the Price Elasticity of Demand for Yachts Equals 4

question 10

Multiple Choice

Suppose the price elasticity of demand for yachts equals 4.04, while the price elasticity of supply for yachts equals 0.22. If Congress reinstates a luxury tax on yachts, who will pay more of the tax?

• A) Yacht builders will pay more.
• B) Yacht buyers will pay more.
• C) Yacht builders and buyers will pay equally.
• D) It's impossible to tell without additional information.

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Definitions:

Minimum Units

The smallest quantity of something required or allowed, especially in the context of production or inventory.

Market System

An economic system where decisions regarding investment, production, and distribution are based on supply and demand, and prices of goods and services are determined in a free price system.

Entrepreneurs

Individuals who provide entrepreneurial ability to firms by setting strategy, advancing innovations, and bearing the financial risk if their firms do poorly.

Production Techniques

Production Techniques encompass the methods and processes used in the creation of goods and services, including labor, technology, and machinery.