Quiz: quiz3 This Question: 1 pt 8 of 10 (7 complete) Y Suppose the government ap

Question

Quiz: quiz3 This Question: 1 pt 8 of 10 (7 complete) Y Suppose the government applies a specific tax to a good where the demand elasticity, e, is-0.2, and the supply elasticity. T1-is 13. This good would be an ideal good for the government to tax since demand is 0 A. inelastic and would raise much revenue. O B. elastic and would not raise much revenue. O C. inelastic and would not raise much revenue. O D. elastic and would raise much revenue. What is the tax incidence on consumers?(round your answer to two decimal places) Click to select your answerls). ?D 2 3 4 5 6 W E

Explanation / Answer

As absolute Demand value is less than 1 . demand for this good is inelastic and would increase the revenue

Hence option A is correct response

Tax inciedence on consumers

Tax burden on consumer=es/(es+ed)=1.3/(1.3+0.2)=1.3/1.5=0.867

Tax burden on producer=ed/(es+ed)=0.2/(1.3+0.2)=0.2/1.5=0.133

Tax burden is 0.867*Tax

( I guess in this question Tax rate is missing , Kindly multiply Tax rate with to calculate tax inciedance)

Tax Inciedance on Consumer will be 0.867*Tax

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.