The Elasticity of Supply of Capital Is Larger Than the Elasticity

question 72

Multiple Choice

The elasticity of supply of capital is larger than the elasticity of supply of land,so a tax on capital income has ________ deadweight loss and a ________ effect on the equilibrium quantity than does an equal tax on land.

• A) a larger; larger
• B) a larger; smaller
• C) a smaller; larger
• D) a smaller; smaller
• E) no; smaller

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Definitions:

Midpoint Method

A technique used in economics to calculate the elasticity of demand or supply by using the midpoint between two points on a curve instead of relying on the initial or final point alone.

Price Elasticity

An indicator of the degree to which the demand for a product reacts to shifts in its price, showing how susceptible demand is to price fluctuations.

Equation

A mathematical statement that asserts the equality of two expressions, usually written with an equals sign ("=").

Midpoint Method

A technique used in economics to calculate the elasticity of demand or supply by taking the average of the starting and ending prices and quantities.