Suppose the Elasticity of Demand for a Product Is 0

question 57

Multiple Choice

Suppose the elasticity of demand for a product is 0 and elasticity of supply is 1.If the government imposes a tax on the product,then

• A) buyers and sellers pay exactly the same share of the tax.
• B) buyers pay all of the tax.
• C) sellers pay all of the tax.
• D) buyers pay a smaller share of the tax than do sellers, but both buyers and sellers pay some of the tax.
• E) because the elasticity of demand is zero, the government collects no revenue from this tax.

Evaluate the effectiveness of supply-side economics and its policies.

Analyze the consequences of fiscal policy decisions on economic indicators like GDP, unemployment, and inflation.

Assess the role of government purchases and taxation in modifying aggregate demand.

Understand the implications of temporary and permanent changes in income and taxes on consumption decisions.

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Definitions:

Interstate Land Sales Full Disclosure Act

A federal law that aims to prevent fraudulent marketing practices in the sale of land and to ensure that buyers receive adequate information before purchasing.

Unimproved Land

Land that remains in its natural state, without any man-made additions or changes such as buildings or other structures.

Common Promotional Plan

A marketing strategy that employs varied promotional tools and resources to reach a broad audience effectively.

Consumer Transactions

Deals or agreements carried out between sellers and purchasers, specifically involving the acquisition of goods or services for personal, family, or household use.