Your boss, the mayor of a city, thought that she'd come up with a great way to raise city revenue: increase the tax on gasoline in the city! However, she discovered that the city was actually receiving less tax revenue after the gas tax increase than before. Incensed, she declared that the economic policy prescription of taxing goods with inelastic demand must be flawed. Comment on her conclusion.
What will be an ideal response?
Your boss is right that the demand for gasoline is inelastic, but she's wrong because the demand for gas in a particular location is not. If taxes go up in the city, people might go to the suburbs to buy gas. So the demand for gasoline in the city might actually be elastic, leading to the observed outcome.
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If, for a given percentage increase in price, quantity demanded falls by a proportionately smaller percentage, then demand is
A) relatively elastic. B) relatively inelastic. C) perfectly elastic. D) unit elastic.
A rightward shift in the demand curve for a product will ordinarily result from
A. a decrease in the advertising budget. B. a decrease in the price of a competing product. C. an increase in consumer income. D. an increase in the price of a complementary good.
On a graph, an increase in quantity demanded is represented by a:
a. Movement downward and to the right along the demand curve b. Leftward shift of the demand curve c. Rightward shift of the demand curve d. Movement upward and to the left along the demand curve
Refer Exhibit 2-10. Person A has the comparative advantage in the production of _____________ and person B has the comparative advantage in the production of __________________.
 ANSWER 11.png)
Fill in the blank(s) with the appropriate word(s).