1. For a tax to be effective, the tax should have a... a. low price elasticity...
1. For a tax to be effective, the tax should have a...
a. low price elasticity of demand
b .high price elasticity of demand
2. short answer: Why are many team owners able to benefit from public financing of stadiums?
Homework Answers
1: a
Tax can only be effective if the elasticity of demand is low. If the elasticity of demand is high, the quantity sold of a particular product on which tax has been levied will decline due to higher prices. The impact will be lesser amount of total tax. But if the elasticity of demand is low, the quantity sold will be the same or similar and the total tax collected will be higher.
2: Public financing of stadiums is simply a subsidy for the rich team owners who can afford the financing themselves. The amount spent from taxpayers money does not yield any additional taxes or public income. The money generated from the sale of tickets and sponsors flows to the team owners. Hence they are the primary beneficiaries of public financing of stadiums.
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