What is the error in the following argument? "An increased sales tax on gasoline won't reduce consumption, because while the higher price will at first reduce demand, the reduced demand will eventually bring the price back down again, and consumption
will return to its former level." A) A higher price doesn't reduce demand.
B) A reduced demand does not cause lower prices.
C) The tax-induced price increase may be greater than the price reduction due to the lower demand.
D) the tax-induced price increase will necessarily be greater than the price reduction due to the lower demand, because demand is never perfectly inelastic.
E) The ultimate effect on consumption may be to increase it beyond its original level.
A
You might also like to view...
Refer to Table 3-1. The table above shows the demand schedules for Kona coffee of two individuals (Luke and Ravi) and the rest of the market. At a price of $6, the quantity demanded in the market would be
A) 36 lbs. B) 68 lbs. C) 89 lbs. D) 123 lbs.
An example of statistical discrimination would be:
A. charging young drivers a higher premium than older drivers. B. charging homes near a lake higher premiums for flood insurance than those on a hill. C. assuming the food will be better at an Italian restaurant than a Chinese one in the Little Italy neighborhood of NYC. D. All of these are examples of statistical discrimination.
A ____ total cost function yields a U-shaped average total cost function
a. cubic b. quadratic c. linear d. a and b only e. a, b, and c
Read "Teen Pregnancy Prevention: Welfare Reform's Missing Component," by Isabel Sawhill of the Brookings Institution
Is this an example of positive economics, normative economics, or a combination of both positive and normative economics? Briefly state the positive and/or normative economic arguments that are embedded in this article.