The deadweight loss of a specific tax will be a small share of the tax revenue collected if:
A) supply is more inelastic than demand.
B) demand is more inelastic than supply.
C) supply and demand are both elastic.
D) supply and demand are both inelastic.
Question 2
Suppose the aggregate demand for housing in the U.S. includes a substantial speculative component. What happens of the expectations of speculators change, and they believe housing prices will not increase in the future?
A) The aggregate demand curve shifts leftward, and the equilibrium market price declines.
B) The aggregate demand curve shifts leftward, and the equilibrium market price increases.
C) The speculative demand curve shifts leftward, but the aggregate demand curve is unchanged.
D) There is no change in the current demand for housing because speculators' expectations are based on future events.
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