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?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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