Assume That the Price Elasticity of Demand Is 0

question 120

Multiple Choice

Assume that the price elasticity of demand is 0.20. Given a 10 percent increase in price, we will see a

• A) 20 percent increase in the quantity demanded.
• B) 2 percent decrease in the quantity demanded.
• C) 20 percent decrease in the quantity demanded.
• D) 0.2 percent decrease in the quantity demanded.
• E) 2 percent increase in the quantity demanded.

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Definitions:

Payroll Taxes

Contributions required from employers and their workers, determined as a portion of the payroll expenses incurred by the employer.

Workers

Individuals engaged in any form of productive activity, typically in exchange for wages or salaries.

Corporate Profits Tax

A levy placed on the profit of corporations, calculated as the net income of the firm after deducting costs and expenses.

Individual Income Tax Rate

The percentage of an individual’s income that is paid to the government as tax.