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Stells [14]
3 years ago
10

The price elasticity of demand for a particular cancer drug is zero and the price elasticity of supply is 0.50. If a $1 excise t

ax is levied on producers, how much of this tax will eventually be paid by consumers?
Business
1 answer:
Ede4ka [16]3 years ago
7 0

Answer:

$1 or 100% of the tax

Explanation:

When the price elasticity of demand is 0, it means that the good or service will be purchased regardless of its cost. Very few things have such a low price elasticity, and the fact that this is drug for treating cancer is the reason why that happens. Anyone that can purchase a drug that will keep you alive, will do so as long as you have enough money to do so. Another good with a very low price elasticity, but not 0, is gasoline with a 0.02 to 0.04, and gasoline is a basic necessity also.

The curve for a perfectly inelastic good is vertical. So any increase in taxes will be paid by the customers.

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tatyana61 [14]

Answer: Option (a) is correct.

Explanation:

Correct option: Aggregate demand shifts right.

Aggregate demand = consumption + government spending + Investment + Net Exports

Other things remains constant, if there is an increase in the government spending, as a result aggregate demand curve shifts rightwards. This will lead to increase the price level and level of output.

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The gross S Corporation income (or loss) reported in Appendix E is included in the income from rentals, royalties, partnerships, S Corporations, trusts, etc. section of an individual's Form 1040.

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