Suppose the government eliminates the income tax and replaces it with a consumption tax. With a consumption tax, individuals pay a tax on only the part of the income they spend rather than save. Think about the effect of this change on the market for automobiles. Can you necessarily tell what will happen to the price and quantity of automobiles? A. The equilibrium quantity will be lower and the equilibrium price will be higher. B. A consumption tax would have no effect on the market for automobiles. OC. The equilibrium quantity will be higher and the equilibrium price will be lower. D. The equilibrium quantity will be lower and the equilibrium price will be lower.

Suppose the government eliminates the income tax and replaces it with a consumption tax. With a consumption tax, individuals pay a tax on only the part of the income they spend rather than save. Think about the effect of this change on the market for automobiles. Can you necessarily tell what will happen to the price and quantity of automobiles? A. The equilibrium quantity will be lower and the equilibrium price will be higher. B. A consumption tax would have no effect on the market for automobiles. OC. The equilibrium quantity will be higher and the equilibrium price will be lower. D. The equilibrium quantity will be lower and the equilibrium price will be lower.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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