Suppose the government imposes a tax on Good X.In order to estimate the effect of the tax on the quantity demanded Good Y,a related good,we can use the concept of ________.
A) the price elasticity of demand
B) deadweight loss
C) the cross-price elasticity of demand
D) the budget constraint

Question

Quizplus · Accepted Answer

The concept that can help us estimate the effect of the tax on the quantity demanded of Good Y is the cross-price elasticity of demand. This measures the responsiveness of the quantity demanded of one good (Good Y) to a change in the price of a related good (Good X). By calculating the cross-price elasticity of demand, we can determine whether the tax on Good X will cause an increase or decrease in the quantity demanded of Good Y. Options A, B, and D are not directly related to estimating the effect of the tax on the quantity demanded of Good Y.

Suppose the Government Imposes a Tax on Good X