Tough economics elasticity question?
Consider four markets for luxury yachts, Markets A, B, C, and D. The demand for yachts in Market A is perfectly elastic. In Market B the price elasticity of demand, as an absolute value, is 3. In Market C the price elasticity of demand, as an absolute value, is 0.25. Finally, the demand for yachts in Market D is perfectly inelastic.
The elasticity of supply in all four markets is identical across every level of quantity. Answer the following questions.
If you wanted to lessen the efficiency costs of a specific government-imposed tax, upon which market would you impose the tax?
Market D, because the consumers would still buy the same amount despite the higher price.
yacht supplies