Economics: The Basics 1st Edition by Mike Mandel

تمرين 8

A town decides to impose a new tax of 30 percent on food sold in its town.
a) Suppose the town is in the middle of the desert, so there are no other places nearby for people to buy food. Is the burden of the tax more likely to fall on food stores or food purchasers? Explain in terms of elasticities.
b) Now suppose the town is in the middle of a densely populated region of the country, so it's easy for food shoppers to go to stores in other towns. Is the burden of the tax more likely to fall on food stores or food purchasers? Explain in terms of elasticities.