Explain the relationship between the incidence of a tax and elasticity
What will be an ideal response?
It does not matter whether a tax is imposed on the buyers or the sellers. Once the tax is imposed in the market, the buyers and the sellers generally will both pay a share of the tax because the buyers will pay a higher price and the sellers will receive a lower price. The incidence of the tax between the buyers and the sellers depends in the elasticities of demand and supply. Because elasticity is a measure of sensitivity to a change in price, the side of the market--buyers or suppliers--that is less sensitive to price changes will end up paying a larger proportion of the tax.
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The total burden of a tax equals tax receipts plus excess burden.
Answer the following statement true (T) or false (F)
Which of the following is true concerning unilateral transfers in the U.S. balance of payments?
a. Unilateral transfers have been positive since World War II. b. Unilateral transfers have been negative since World War II. c. Unilateral transfers have been negative every year since World War II except during the war in Iraq. d. The United States places tight restrictions on moneys being sent out of the country. e. Developing countries ordinarily place no restrictions on moneys being sent out of their countries.
If the Fed increased the discount rate,
a. banks would make more loans b. the money supply would increase c. firms would be more likely to seek out loans d. the required reserve ratio would increase e. banks would make fewer loans
The primary claim of defenders of advertising is that it
a. conveys information about firm profitability. b. is psychological rather than informational. c. enhances the information available to consumers. d. reduces the elasticity of demand for a firm's product.