Suppose You Are the Manager of a Home-Building Company and the Government

question 162

Essay

Suppose you are the manager of a home-building company and the government is considering eliminating the tax deductibility of mortgage interest payments.A typical consumer's marginal tax rate is 25 percent,and the elasticity of demand for new homes is −1.5.Your boss wants to know the impact of the proposed government policy on your business.What do you tell him?

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Definitions:

Stereotyped Perceptions

Oversimplified and fixed ideas or concepts of a particular group of people or things.

Social Stigma

The disapproval or discrimination against a person or group based on perceptible social characteristics that serve to distinguish them from other members of a society.

Self-Perception Theory

A theory suggesting that individuals develop attitudes and opinions by observing their own behavior and concluding what attitudes must have caused them.

Cognitive Dissonance

A psychological phenomenon where there is a conflict between one's beliefs and behaviors, causing discomfort that leads to an attempt to change beliefs or behaviors to reduce the dissonance.