Author Question: How does the elasticity of demand influence the incidence of a tax, the tax revenue, and the ... (Read 34 times)

jon_i · **on:** Jun 29, 2018

How does the elasticity of demand influence the incidence of a tax, the tax revenue, and the deadweight loss?

What will be an ideal response?

Question 2

Ceteris paribus, an increase in the government's budget deficit will increase the current account deficit.

Indicate whether the statement is true or false

jlaineee · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The more elastic the demand for a given supply, the smaller the increase in the price paid by the buyers and the greater the decrease in the price received by the sellers, which means that the incidence on buyers is smaller. Additionally, the more elastic the demand, the smaller the quantity bought so the smaller the tax revenue; and the larger the deadweight loss.

Answer to Question 2

TRUE