If the Price Elasticity of Demand Equals 1

question 476

Multiple Choice

If the price elasticity of demand equals 1.0, then as the price falls, the

• A) quantity demanded decreases.
• B) total revenue falls.
• C) quantity demanded does not change.
• D) total revenue does not change.

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Definitions:

Negative Income Tax

A fiscal mechanism designed to provide income to individuals or families whose earnings fall below a certain level, effectively supplementing their income through a government subsidy.

Taxes Owed

The amount of money that an individual, corporation, or other entity is legally obligated to pay to governmental authorities, typically calculated based on income, property value, or consumption.

Income Subsidy

A monetary assistance provided by the government to individuals or groups to increase their income level, often aimed at reducing poverty.

Redistributing Income

The transfer of income from certain individuals or groups to others through mechanisms like taxation, welfare programs, and social policies to achieve greater social equity.