NARRBEGIN: Exhibit 5-21 Exhibit 5-21

question 10

Multiple Choice

NARRBEGIN: Exhibit 5-21
Exhibit 5-21

-Use the information in Exhibit 5-21 to calculate the value of income elasticity of demand for Good A.

• A) 1
• B) 2/9
• C) 3/11
• D) 11/3
• E) 9/2

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Definitions:

Saving Rate

The proportion of disposable income that is saved rather than spent by households.

Tax Base

The total amount of assets or income that can be taxed by a governing authority, forming the essential revenue source.

Progressive Income Tax

A tax system where the tax rate increases as the taxable amount increases, placing a higher tax burden on high-income earners.

Ability-to-Pay Principle

A tax principle suggesting that taxes should be levied according to an individual or entity's capacity to pay, generally implying that those with higher incomes should pay more tax.