Consider an ad-valorem tax on a good X. The Demand for good X is constant elasticity with elasticity -2. The Supply for good Y is constant elasticity with elasticity 3. Consider the same setting as for the previous question. When a tax of 1% of the price is imposed on good X, then equilibrium quantity of X exchanged declines by what percentage?
Consider an ad-valorem tax on a good X. The Demand for good X is constant elasticity with elasticity -2. The Supply for good Y is constant elasticity with elasticity 3. Consider the same setting as for the previous question. When a tax of 1% of the price is imposed on good X, then equilibrium quantity of X exchanged declines by what percentage?
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter5: Elasticity Of Demand And Supply
Section5.A: Appendix: Price Elasticity And Tax Incidence
Problem 1AQ
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Consider an ad-valorem tax on a good X. The Demand for good X is constant elasticity with elasticity -2.
The Supply for good Y is constant elasticity with elasticity 3.
Consider the same setting as for the previous question. When a tax of 1% of the price is imposed on good X, then
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