Consider a 10- percent excise tax that is similarly applied to good X, which has a price elasticity of 2.7, and to good Y, that has a price elasticity of 0.6. We can predict that the excess burden of this tax in the market for good X will be the excess burden in the market for good Y.

Question

Quizplus · Accepted Answer

The excess burden of a tax is larger for goods with higher price elasticity. Since good X has a higher price elasticity (2.7) compared to good Y (0.6), the excess burden of the tax on good X will be larger.

Consider a 10- Percent Excise Tax That Is Similarly Applied