Housing Tends to Take Up a Substantial Share of a Consumer's

question 288

Multiple Choice

Housing tends to take up a substantial share of a consumer's spending. An increase in the price of housing will result in:

• A) both an income and substitution effect to decrease the quantity demanded of housing.
• B) both an income and substitution effect to increase the quantity demanded of housing.
• C) the income effect of increasing the quantity demanded of housing and the substitution effect of decreasing the quantity demanded of housing.
• D) the income effect of decreasing the quantity demanded of housing and the substitution effect of increasing the quantity demanded of housing.

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Definitions:

Indirect Tax

A tax collected by an intermediary (like a retailer) from the person who bears the ultimate economic burden of the tax (like the consumer). Examples include sales tax and VAT (Value Added Tax).

Fiscal Year

A 12-month period used for accounting purposes and preparing financial statements that may or may not align with the calendar year.

Marginal Tax Rate

The tax rate applied to the last dollar of income earned.

Direct Tax

Direct Tax is a type of tax directly imposed on individuals or organizations, such as income tax or corporate tax, where the tax burden cannot be shifted to another party.