If the Absolute Price Elasticity of Demand for a Product

question 331

Multiple Choice

If the absolute price elasticity of demand for a product is less than 1, then

• A) the absolute price elasticity of demand is inelastic and consumers are relatively insensitive to price changes.
• B) the absolute price elasticity of demand is inelastic and consumers are relatively sensitive to price changes.
• C) the absolute price elasticity of demand is elastic and consumers are relatively insensitive to price changes.
• D) the absolute price elasticity of demand is elastic and consumers are relatively sensitive to price changes.

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Definitions:

Sales Tax

A consumption tax imposed by the government on the sale of goods and services.

Structural

Relating to the underlying or foundational aspects or structures of a system, organization, or building.

Lump-Sum Tax

A tax that is a fixed amount and does not vary with the taxpayer's income or consumption levels.

Proportional Tax

A tax system where the tax rate remains constant regardless of the amount subject to tax, meaning everyone pays the same proportion of their income.