The local government decides to impose a sales tax on some selected items. On item X the final prices increases almost the full amount of the tax, demand does not change much and the tax revenues collected are quite high. On item Y the price increases very little but demand falls quite a bit and very little tax revenue is collected. Is this a violation of the law of demand or something else? Explain.
The local government decides to impose a sales tax on some selected items. On item X the final prices increases almost the full amount of the tax, demand does not change much and the tax revenues collected are quite high. On item Y the price increases very little but demand falls quite a bit and very little tax revenue is collected. Is this a violation of the law of demand or something else? Explain.
Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter6: Demand And Elasticity
Section: Chapter Questions
Problem 3TY
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The local government decides to impose a sales tax on some selected items. On item X the final prices increases almost the full amount of the tax, demand does not change much and the tax revenues collected are quite high. On item Y the price increases very little but demand falls quite a bit and very little tax revenue is collected. Is this a violation of the
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