If the Price Elasticity of Supply Is 1

question 249

Multiple Choice

If the price elasticity of supply is 1.5,and a price increase led to a 3% increase in quantity supplied,then the price increase amounted to

• A) 0.2%.
• B) 0.5%.
• C) 2%.
• D) 4.5%.

Understand how the burden of taxes is distributed between consumers and producers based on the relative price elasticities of demand and supply.

Analyze the revenue generation from taxes imposed on goods and services.

Grasp the concept of deadweight loss resulting from taxes and understand its implications on economic welfare.

Understand the effects of price ceilings and price floors on market outcomes.

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Definitions:

GDP Deflator

A metric that assesses the prices of all new, internally produced final goods and services in an economic system, employed in the adjustment of nominal GDP to real GDP.

Real GDP

Real Gross Domestic Product (Real GDP) measures the value of all finished goods and services produced within a country's borders in a specific period, adjusted for inflation.

GDP

The total value of all produced goods and services within a country over a particular time period is what Gross Domestic Product (GDP) measures.

GDP Deflator

A measure of the level of prices of all new, domestically produced, final goods and services in an economy in a year, intended to adjust the nominal GDP to reflect changes in price levels.