The government wants to tax the price of apples (X1) by a per-unit tax. If it wants to study the substitution effect of this tax, it should compensate for the utility change by O a. Increasing the price of oranges (X2 ) O b. Decreasing the price of oranges O c. Imposing a Lump-sum tax d. Providing a Lump-sum subsidy

The government wants to tax the price of apples (X1) by a per-unit tax. If it wants to study the substitution effect of this tax, it should compensate for the utility change by O a. Increasing the price of oranges (X2 ) O b. Decreasing the price of oranges O c. Imposing a Lump-sum tax d. Providing a Lump-sum subsidy

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter19: Elasticity

Section: Chapter Questions

Problem 4QP

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Similar questions

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Aaanswee
8 When the price of a pizza slice decreases from $2 to $1, the case should be in a way the None of the answers given here is correct. income effect means elasticity of demand increases from 1 to 2. quantity demanded of pizza will not change. substitution effect means people buy more pizza. O income effect means elasticity of income increases from 1 to 2.
QUESTION 8 The demand for bicycles decreases by 10 as a result of an increase in the price of bicycles. The substitution effect alone would predict a decrease of 12 units. We can conclude that O a. Bicycles are a Giffen good O b. Bicycles are inferior goods OG Bicycles have a positive elasticity of demand with respect to income O d. Substitution and income effects have the same magnitude O e. None of the proposed answers is correct