QUESTION 25 Suppose that demand changes, and the (inverse) demand curve moves P = 82 -0.5Q to P = 73.8 -0.5Q. This change could be explained by an increase in the incomes of consumers. an increase in the price of an input used to produce good X. a change in the tastes of consumers, reflecting that they now prefer good X less. the introduction of an indirect tax on good X, such as a sales tax. QUESTION 26 Suppose that the supply of good X changes, and the (inverse) supply curve moves from P = 17.5 + 0.25Q to P = 19.25 + 0.25Q. This change could be explained by the removal of an indirect tax on good X, such as a sales tax. a change in the tastes of consumers, reflecting that they now prefer good X less. an increase in the incomes of consumers. an increase in the price of an input used to produce good X. QUESTION 27 Suppose that the supply of good X changes, and the (inverse) supply curve moves from P = 82 + 0.25Q to P = 73.8 + 0.25Q. This change coul- be explained by a change in the tastes of consumers, reflecting that they now prefer good X less. a decrease in the price of an input used to produce good X. the introduction of an indirect tax on good X, such as a sales tax. an increase in the incomes of consumers.

QUESTION 25 Suppose that demand changes, and the (inverse) demand curve moves P = 82 -0.5Q to P = 73.8 -0.5Q. This change could be explained by an increase in the incomes of consumers. an increase in the price of an input used to produce good X. a change in the tastes of consumers, reflecting that they now prefer good X less. the introduction of an indirect tax on good X, such as a sales tax. QUESTION 26 Suppose that the supply of good X changes, and the (inverse) supply curve moves from P = 17.5 + 0.25Q to P = 19.25 + 0.25Q. This change could be explained by the removal of an indirect tax on good X, such as a sales tax. a change in the tastes of consumers, reflecting that they now prefer good X less. an increase in the incomes of consumers. an increase in the price of an input used to produce good X. QUESTION 27 Suppose that the supply of good X changes, and the (inverse) supply curve moves from P = 82 + 0.25Q to P = 73.8 + 0.25Q. This change coul- be explained by a change in the tastes of consumers, reflecting that they now prefer good X less. a decrease in the price of an input used to produce good X. the introduction of an indirect tax on good X, such as a sales tax. an increase in the incomes of consumers.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the income elasticity of demand for food is 0.45 and the price elasticity of demand is 1.00. Suppose also that Felicia spends $10,000 a year on food, the price of food is $2, and that her income is $ 25,000. If a sales tax on food caused the price of food to increase to $2.50, what would happen to her consumption of food? Because a large price change is involved, use the arc elasticity to measure the price elasticity of demand rather than a point elasticity. Felicia's consumption of food would decrease by units. ( Enter your response rounded to two decimal places.) Suppose that Felicia gets a tax rebate of $2,500 to ease the effect of the sales tax. What would her consumption of food be now? (Again, use an arc income elasticity to answer this question instead of a point income elasticity.) Felicia's consumption of food would now be 4,175.18 units. (Enter your response rounded to two decimal places.) Is she better or worse off when given a rebate equal to the sales tax payments?…
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