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Percentage tax or the flat tax

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Reference no: EM131112904

Compare the effect of a $1,000 tax on cars with the effect of a 10 percent tax on cars. Which tax is likely to have the same impact on the demand for cars (in percentage terms) no matter which year it was imposed? In other words, if the tax was imposed in 1988 versus 2008 which tax would have the same impact - the percentage tax or the flat tax? Why is this true?

Reference no: EM131112904

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