'Assume that the supply of forest products is relatively inelastic and the supply of coffee is relatively elastic'.According to this statement, suppose both forest products and coffee have the same percentage tax applied to them, the fall in quantity supplied of forest products will be:
A)more than the fall in quantity supplied of coffee
B)less than the fall in quantity supplied of coffee
C)equal to the fall in quantity supplied of coffee
D)either more or less than the fall in quantity supplied of coffee, depending on the elasticity of demand

Question

Quizplus · Accepted Answer

The supply of forest products is relatively inelastic, meaning it is less responsive to price changes, while the supply of coffee is relatively elastic, meaning it is more responsive. Therefore, a tax will cause a smaller decrease in the quantity supplied of forest products compared to coffee.

'Assume That the Supply of Forest Products Is Relatively Inelastic