📚 Learning Guide
Tax Burden and Consumer Behavior
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If the tax burden on consumers of good A is greater than that on consumers of good B, then the demand for good A is to the tax burden as the demand for good C is to what?

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Learning Path

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Choose the Best Answer

A

The higher the elasticity of demand

B

The lower the elasticity of demand

C

The price elasticity of supply

D

The level of consumer income

Understanding the Answer

Let's break down why this is correct

Answer

When the tax burden on consumers of good A is greater than that on good B, it means that consumers will likely buy less of good A because it costs them more after the tax. This situation can change their behavior and preferences, leading to a decrease in demand for good A. Similarly, if we think about good C, its demand will be affected by how much consumers feel they are paying overall. Therefore, the demand for good C is to the tax burden as the demand for good B is to the tax burden on good A. For example, if good A's tax makes it too expensive, consumers might switch to good B or C, which have lower tax burdens.

Detailed Explanation

When demand is less elastic, consumers are less sensitive to price changes. Other options are incorrect because Some might think that higher elasticity means consumers will buy more; This option confuses demand with supply.

Key Concepts

Tax Incidence
Elasticity of Demand
Consumer Behavior
Topic

Tax Burden and Consumer Behavior

Difficulty

medium level question

Cognitive Level

understand

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