The Income Elasticity of Demand Is

question 252

Multiple Choice

The income elasticity of demand is

• A) positive for a normal good.
• B) zero for an inferior good.
• C) less than one for an income elastic normal good.
• D) Only answers A and B are correct.
• E) Answers A, B, and C are correct.

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Definitions:

Regressive Rate Structure

A tax system where the tax rate decreases as the taxable amount increases, placing a higher burden on lower earners relative to higher earners.

Marginal Tax Rate

The rate at which the next dollar of taxable income will be taxed, a tool used to gauge the impact of additional income or deductions on income tax.

Taxable Income

The amount of income used to calculate how much the tax will be for an individual or a corporation, after all deductions and exemptions.

Tax Liability

The total amount of tax owed to the IRS by an individual or business for a given tax year.