Economics 9708 · AS & A Level · Income elasticity of demand

Income elasticity of demand — practice question

For a market for a good, the quantity supplied (QS) and quantity demanded (QD) are defined by QS = P – 30 and QD = 240 – 2P, where P = price in dollars. If a tax change on the good causes QS to become QS = P – 36, what effect will this have on the equilibrium price?

  • AIt will fall by $2.
  • BIt will fall by $6.
  • CIt will rise by $2.
  • DIt will rise by $6.

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