If a good has a price elasticity of demand equal to 0.4, and the price elasticity of supply is equal to 6.5, the good is a strong candidate for a unit tax.

Question

Quizplus · Accepted Answer

A good with a low price elasticity of demand (0.4) and a high price elasticity of supply (6.5) is a strong candidate for a unit tax because the burden of the tax can be more efficiently distributed between producers and consumers, minimizing distortions in the market.

If a Good Has a Price Elasticity of Demand Equal