Suppose the market for grass seed is expressed as:
Demand: QD = 100 - 2p
Supply: QS = 3p
Price elasticity of supply is constant at 1. If the supply curve is changed to Q = 8p, price elasticity of supply is still constant at one. Yet with the new supply curve, consumers pay a larger share of a specific tax. Why?
Even though the elasticity of supply has not changed, the new supply curve intersects the old demand curve at a lower price where demand is relatively less elastic than at the higher price. As a result, consumers' tax incidence is higher.
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An argument in favor of the Federal Reserve adopting inflation targeting is that in the long run, the Fed can have an impact on inflation but not on real GDP
Indicate whether the statement is true or false
An example of an excludable good or service is a:
A. city park. B. movie in a theater. C. levee system. D. rainbow.
When a country gains from trade:
A. everyone in that country benefits from the trade. B. the total producer surplus increased in the country. C. the net gain of surplus is positive for that country. D. the total consumer surplus increased in the country.
Economists concerned about economy-wide trends in the unemployment of labor, the rate of inflation, and the level of economic production are studying:
A) microeconomics. B) macroeconomics. C) specific units or parts of the economy. D) the "trees" of economic behavior, rather than the "forest."