explain the elasticity of demand for items subject to sales tax vs gasoline or cigarettes.
Homework Answers
Since the elasticity of demand can be defined as the measurement of the degree of the responsiveness of the quantity demand due to the change in the price level.
Ed= % change in the quantity demand/ % change in the price
The elasticity of demand of necessary good is inelastic demand.
So the elasticity of demand for items subjects to sales tax will be elastic because with the change in the price of these goods, the responsiveness of quantity demand due to price change will be very high.
On the other hand, gasoline is a necessary goods, so demand for it will be inelastic because effect of change in the price will be negligible. Demand for cigarettes will be inelastic because effect of change in price on the quantity demand will be negligible.
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explain the elasticity of demand for items subject to sales tax vs
gasoline or cigarettes.
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