Question

price change for either consumers or producers). Compare elasticity of demand to elasticity of supply at the equilibrium price and quantity. If adding a tax, we can say that since A) Demand is more elastic than supply, the consumer burden of the tax will be larger than the producer burden. B) Demand is less elastic than supply, the consumer burden of the tax will be larger than the producer burden. C) Demand is equally elastic as supply, their burdens will be equal. D) Relative elasticity cannot be determined. 8. If income elasticity is 2 then the good is A) an inferior good and a 1 percent increase in income decreases quantity demanded by 2 percent. B) an inferior good and a 1 percent increase in income decreases quantity demanded by 1/2 a percent. C) a normal good and a 1 percent increase in income increases quantity demanded by 2 percent. D) a normal good and a 1 percent increase in income increases quantity demanded by 1/2 a percent. E) none of the above. 4. Suppose that labour is the only variable input. At what quantity of labour do returns start to diminish? A) 6 B) 8 C) 10 D) 12 E) 14 F) 24 10. At quantity of labour equals 16, what is the total output? A) 25 units B) 30 units C) 400 units D) 480 units E) None of the above

Answer 1

The tax burden is distributed based on the relative elasticities of demand and supply; more elastic demand puts more tax burden on producers, and more elastic supply puts more on consumers. Income elasticity of 2 signifies a normal good with a proportional increase in demand as income rises. Specific points of diminishing returns and total output cannot be provided without the corresponding data or production function.

Step-by-step explanation:

The elasticity of demand and elasticity of supply at the equilibrium price and quantity impact the distribution of tax burden between consumers and producers. If the demand is more elastic than supply, producers will bear a larger portion of the tax. Conversely, if the supply is more elastic than demand, consumers will shoulder a larger share. Regarding the income elasticity of 2, this indicates that the good is a normal good, and a 1 percent increase in income leads to a 2 percent increase in the quantity demanded.

As for the determination of diminishing returns with respect to labor, without the specific production function or data points, the exact quantity of labor where returns start to diminish cannot be determined. Similarly, the total output at a certain quantity of labor cannot be ascertained without further information on the production function or output data associated with different input levels.