Question

Question 18 (1 point) When a tax is placed on the sellers of a product, buyers pay O a) less, and sellers receive less than they did before the tax. Ob) more, and sellers receive more than they did before the tax. Oc) less, and sellers receive more than they did before the tax. d) more, and sellers receive less than they did before the tax. Question 19 (1 point) If the price elasticity of demand for a good is 0.4, then a 10 percent increase in price results in a a) 40 percent decrease in the quantity demanded. Ob) 2.5 percent decrease in the quantity demanded. c) 0.4 percent decrease in the quantity demanded. d) 4 percent decrease in the quantity demanded.

Answer 1

18. Option D

Explanation: The burden of the tax would be shared by both the buyer and the seller.

19. Option D

Explanation: 0% change in quantity demanded = % change in price * price elasticity of demand = 10% * 0.4 = 4%

20. Option A

Explanation: In inelastic demand, the % change in quantity is lower than the % change in price. So, elasticity of demand is less than 1.

21. Option A

Explanation: When demand curve shifts left, there is a fall in demand.

22. Option A

Explanation: When price is $6, consumer 1 buys 4 units and consumer 2 buys 15 units. So, total demand = 4+15 = 19 units.