Now assume the government raises the tax from $1.00 to $1.50. This causes sale to decline from 10,000 units to 5,000 units. a) calculate the price(tax) elasticity of demand. b) is it elastic, inelastic, or unit elastic? c) what happens to total tax revenue?

Now assume the government raises the tax from $1.00 to $1.50. This causes sale to decline from 10,000 units to 5,000 units. a) calculate the price(tax) elasticity of demand. b) is it elastic, inelastic, or unit elastic? c) what happens to total tax revenue?

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter6: Elasticity

Section6.4: The Relationship Between Taxes And Elasticity

Problem 3ST

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Now assume the government raises the tax from $1.00 to $1.50. This causes sale to decline from 10,000 units to 5,000 units.
a) calculate the price(tax) elasticity of demand.

b) is it elastic, inelastic, or unit elastic?

c) what happens to total tax revenue?

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