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If There Is a $1 Per Box Tax Imposed on the Sale

Question 3

Multiple Choice

If there is a $1 per box tax imposed on the sale of tea and the price paid by consumers increases by $0.50, what may we conclude about the price elasticities of demand and supply?


A) The elasticity of supply must be less than the price elasticity of demand
B) The amount exchanged in the market will remain the same
C) The elasticity of supply must be greater than the price elasticity of demand
D) The elasticity of supply must be equal to the elasticity of demand
E) We need more information to answer the question

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