Question

27). Assume that the demand for salt is relatively inelastic and that the demand for orange juice is relatively elastic. Imposing a tax on salt will cause total decrease in traded quantity than imposing the same percentage tax on orange juice.

Answer 1

27. Assume that the demand for salt is relatively inelastic and that the demand for orange juice is relatively elastic . Imposing a tax on salt will cause a lesser decrease in traded quantity than imposing the same percentage on orange juice. Hence,option(B) is correct.

28. We can expect a tax on gasoline to cause the quantity of gasoline traded to change less than a similar percentage tax on entertainment will cause the quantity of entertainment to decline. Hence,option(B) is correct.

29. The quantity traded of gasoline is change by less than the quantity of entertainment because the gas is more necessary than entertainment which means Gasoline has inelastic demand. Hence, option(B) is correct.

30. If the labor supply is nearly vertical ,then a tax on labor has a small decrease in the quantity of work in the market and a tax on labor has little impact on the amount of work labor is willing to do. Hence,option(D) is correct.