Exam 6: Elasticity

A government wants to place an excise tax on textbooks. It knows that textbooks tend to be purchased at the last minute and that they are necessary because they are required for courses. Textbook publishers can print more textbooks quickly and relatively cheaply. A legislator claims that if the tax is placed on the sellers, textbook buyers should not be affected. Do you agree or disagree? Explain.

When the price of good X increases by 20 percent, the quantity demanded of good Y increases by 40 percent. The cross-price elasticity of demand is equal to _____, and these goods are:

The price elasticity of demand for rice is 2, and the price elasticity of supply of rice is 1.2. What happens if a tax is placed on this good?

Does a good that has a perfectly elastic price elasticity of demand have a lot of substitutes? Explain.

If the price of a good changes and the change in the quantity demanded is proportional to that price change, the good has a _____ demand.

What is the value of the price elasticity of demand for a good that has a perfectly inelastic demand?