The tax elasticity of supply is
A)Always equal to 1.
B)Always less than 1.
C)The percentage change in quantity supplied divided by the percentage change in tax rates.

Question

Quizplus · Accepted Answer

The tax elasticity of supply is the percentage change in the quantity supplied of a good or service divided by the percentage change in the tax rate imposed on that good or service. Therefore, the correct choice is C, which defines the tax elasticity of supply. It is not always equal to 1 or always less than 1 as it is dependent on the specific product and market conditions.

The Tax Elasticity of Supply Is