Assume that the demand and supply curves for cars are elastic. If the government imposes a $500 tax on the buyer of each car, what can we assume will happen to the price of a car?

Question

Accepted Answer

The equilibrium price of a car will decrease by less than $500.

Answer

The equilibrium price of a car will NOT change since both curves are elastic.

Answer

None of the above.

Answer

The equilibrium price of a car will decrease by more than $500.

Answer

The equilibrium price of a car will decrease by exactly $500.

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Assume that the demand and supply curves for cars are elastic. If the government...

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