Check up Think

Digest what you read

1. 
   Based on the information given in the text select True, False, Not Given.
   

TRUE 1- Elasticity is an economics concept that measures responsiveness of one variable changes in another variable.
FALSE 2- The tax incidence depends on the relative price plasticity of supply and demand.
NOT GIVEN 3 Demands and supply often tend to be relatively inelastic in the long run and relatively elastic in the short run.
FALSE 4- An inelastic demand or supply curve is one where a given percentage change in price will cause a larger percentage change in quantity demanded or supplied.
TRUE 5- Taxes on cigarettes serve two purposes: to raise tax revenue for government and to discourage consumption of cigarettes.

2. Select the best answer for the items below. Refer to the text to check your answers.

1. 
   Which sentence is true?
   
   1. 
      The law of supply indicated that a higher price will lead to a lower quantity supplied.
      
   2. 
      State taxes are an example of a “sin tax,” a tax on something that is bad for you, like alcohol.
      
   3. 
      Price elasticity measures the responsiveness of the quantity demanded or supplied of a product to a change in its price.
      
   4. 
      Perfect elasticity refers to the extreme case in which percentage change in price, no matter how large, results in zero change in quantity.
      

2. 
   According to the passage which one is a purpose of taxes on cigarette? The purpose of taxes on cigarette is to………..
   
   1. 
      Decline smoking rate
      
   2. 
      Slow down the price of cigarette
      
   3. 
      Raise tax revenue for government
      
   4. 
      Produce improvements in public places
      

3. 
   Which one is true about “sin taxes”?
   
   1. 
      Sin taxes law is levied by people.
      
   2. 
      They are taxes on something that is bad for you, like alcohol.
      
   3. 
      Sin taxes levied to certain goods which are not so harmful.
      
   4. 
      Sin taxes include bad habits.
      

4. 
   What is infinite Elasticity?
   
   1. 
      Ii is a situation where a price change of one percent results in a quantity change of one percent.
      
   2. 
      Infinite or perfect elasticity refers to the extreme case where either the quantity demanded or supplied changes by an infinite amount in response to any change in price at all.
      
   3. 
      It is computed as the percentage change in quantity demanded.
      
   4. 
      None of above.
      

5. 
   An inelastic demand or supply curve is…..
   

1. 
   when price factors have a small effect on the quantity consumers want to buy
   
2. 
   One where a given percentage changes in price will cause a smaller percentage change in quantity demanded
   
3. 
   When the supply is more than demand, and buyers bear less of the tax burden
   
4. 
   None of the above