Question

The substitution effect: Multiple Choice predicts that taxpayers will work harder to pay for consumer products when tax rates increase. is one of the effects considered in static forecasting. results in the government collecting more aggregate tax revenue than under the income effect.

Answer 1

Answer:

None of these is correct

Explanation:

The substitution effects is the decrease in sales for a product that can be attributed to consumers switching to cheaper alternatives when its price rises. The substitution effect is based on the idea that as prices rise, consumers will replace more expensive items with cheaper substitutions or alternatives, assuming income remains the same.