Consider Sam and Linda Both Drive a Relatively Inefficient Sport

question 23

Multiple Choice

Consider Sam and Linda both drive a relatively inefficient sport utility vehicle (SUV) .Sam has a lease that doesn't expire for three years whereas Linda owns her sport utility vehicle free and clear.If the price of gasoline was to increase by fifty percent,which of these statements is most likely true?

• A) Linda will have a less elastic response than Sam.
• B) Sam will have a less elastic response than Linda.
• C) Sam and Linda will have identically elastic responses.
• D) Sam will have a more elastic response than Linda.

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Definitions:

Long-Term Loan

A type of financing that is paid back over an extended time frame, extending beyond one year.

Capital Gains

The gain realized when the price at which an asset or investment is sold surpasses the price it was originally bought for.

Eligible Dividends

Dividends that are entitled to a reduced tax rate in certain jurisdictions, often meeting specified criteria set by the tax authorities.

Marginal Tax Rates

The rate at which the last dollar of income is taxed, indicating the proportion of any additional dollar of income that will be paid in taxes.