Explain why would elasticity of demand be important

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Reference no: EM1345768

Q. "You are chairperson of a state tax commission responsible for establishing a program to raise new revenue through excise taxes. Explain why would elasticity of demand be important to you in determining the products on which the taxes should be levied?".

Q. Suppose the consumption function is
C = $500 billion + 0.9Y

and the government wants to stimulate the economy. By how much will aggregate demand at current prices shift initially (before multiplier effects) with

a) A $50 billion increase in go vernment purchases?

b) A $50 billion tax cut?

c) A $50 billion increase in income transfers?

Reference no: EM1345768

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