Question

Sometimes laws are proposed that seek to increase the quantity of savings by offering tax breaks to savers, increasing their returns. Such a policy will have a comparatively large impact on increasing the quantity saved if the supply curve for financial capital is ______

Select the correct answer below:

a)elastic

b)inelastic

c)unitary elastic

d)none of the above

Answer 1

The supply curve should be elastic. in that case a smaller change in the return will bring a greater change in the quantity of savings because that supply is relatively elastic. When this happens, percentage change in the price brings in a greater percentage change in the quantity supplied