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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How are the cross elasticity of demand and income elasticity of demand similar and how are they different from the price elasticity of demand?
What will be an ideal response?
At one time, people living in the U.S. were imprisoned or fined for not having legitimate work
Indicate whether the statement is true or false
If Xt and Yt are cointegrated, then the OLS estimator of the coefficient in the cointegrating regression is
A) BLUE. B) unbiased when using HAC standard errors. C) unbiased even in small samples. D) consistent.
Slutsky's theorem combines the Law of Large Numbers
A) with continuous functions. B) and the normal distribution. C) and the Central Limit Theorem. D) with conditions for the unbiasedness of an estimator.