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Elasticity and Total Revenue
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Grade Level
Economics & Financial Literacy
12.11 Elasticity and Total Revenue
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A city is considering a tax on a product whose price rises by 15% after the tax and quantity purchased falls by 18%. What should the city expect compared with a similar product that has inelastic demand?
A
A larger consumer burden because demand is more elastic.
B
A larger quantity decrease and less stable tax revenue.
C
No change in quantity because the tax is included in price.
D
A smaller quantity decrease and more stable tax revenue.
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