Suppose the income elasticity of demand for food is 0.5 and the price elasticity of demand -1.0. Suppose also that your housemate Claire spends $10,000 per year on food, that the price of food is $4, and that her keome is S50,000. a) If a S4 sales tax on food were to cause the price of food to double, how much food woukd Claire's consume? b) Suppose she is given a state sales tax rebate of $5,000 to case the effect of the tax. Now how much food would she-cat?

Suppose the income elasticity of demand for food is 0.5 and the price elasticity of demand -1.0. Suppose also that your housemate Claire spends $10,000 per year on food, that the price of food is $4, and that her keome is S50,000. a) If a S4 sales tax on food were to cause the price of food to double, how much food woukd Claire's consume? b) Suppose she is given a state sales tax rebate of $5,000 to case the effect of the tax. Now how much food would she-cat?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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