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Homework answers / question archive / A price change causes the quantity demanded of a good to decrease by 20 percent, while the total revenue of that good increases by 10 percent is the demand curve elastic or inelastic? Calculate and explain Your answer:
A price change causes the quantity demanded of a good to decrease by 20 percent, while the total revenue of that good increases by 10 percent is the demand curve elastic or inelastic? Calculate and explain Your answer:
The price paid by consumers rise by less than 20000 TL.
Reason- When government imposes tax, it's burden is generally shared by both consumers and producers.
The incidence of tax depends on the elasticity of demand and supply.
The more inelastic the demand is more will be the burden of tax on consumers.
So the rise in price paid by consumers will be less than 20000 TL.
As some part of this tax will be shared by the producers as the price received by producer also falls.
