When the Price of Good a Is $50, the Quantity

question 175

Multiple Choice

When the price of good A is $50, the quantity demanded of good A is 500 units. When the price of good A rises to $70, the quantity demanded of good A falls to 400 units. Using the midpoint method, the price elasticity of demand for good A is

• A)1.50, and an increase in price will result in an increase in total revenue for good A.
• B)1.50, and an increase in price will result in a decrease in total revenue for good A.
• C)0.67, and an increase in price will result in an increase in total revenue for good A.
• D)0.67, and an increase in price will result in a decrease in total revenue for good A.

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Definitions:

Progressive Tax

A tax system where the tax rate increases as the taxable income or base increases, leading to a higher tax burden on wealthier individuals or entities.

Cigarette Tax

A levy imposed by governments on the sale of cigarettes to reduce consumption and generate revenue, often used for public health initiatives.

Proportional Tax

A tax system where the tax rate remains constant regardless of the amount subject to taxation.

Vertical Equity

A principle of fairness in taxation that dictates taxpayers with a greater ability to pay should contribute more in taxes.