If a tax cut of 3 percent causes the output supplied to increase by 6 percent,the absolute value of the tax elasticity of supply is
A)0.5.
B)2.0.
C)6.0.
D)18.0.

Question

Quizplus · Accepted Answer

Tax elasticity of supply = (Percentage change in quantity supplied) / (Percentage change in tax rate)
Given, the percentage change in tax rate = 3%, and the percentage change in quantity supplied = 6%. 
Tax elasticity of supply = (6%)/(3%) = 2.0
Therefore, the absolute value of the tax elasticity of supply is 2.0.

If a Tax Cut of 3 Percent Causes the Output