Suppose That Jane Enjoys Diet Coke So Much That She

question 126

Multiple Choice

Suppose that Jane enjoys Diet Coke so much that she consumes one can every day.Although she enjoys gourmet cheese,she consumes it sporadically.If the price of Diet Coke rises,Jane decreases her consumption by only a very small amount.But if the price of gourmet cheese rises,Jane decreases her consumption by a lot.These examples illustrate the importance of

• A)the availability of close substitutes in determining the price elasticity of demand.
• B)a necessity versus a luxury in determining the price elasticity of demand.
• C)the definition of a market in determining the price elasticity of demand.
• D)the time horizon in determining the price elasticity of demand.

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Definitions:

Per-unit Burden

The financial impact or cost of a tax, fee, or regulation expressed on a per unit basis.

Tax

Compulsory contributions made to government revenues, levied by the government on workers' income and business profits, or added to the cost of some goods, services, and transactions.

Per-unit Burden

The tax cost to a buyer or a seller for each unit of a good or service, often used to analyze the effect of taxes on market equilibrium.

Tax

A financial charge or other levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.