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Macroeconomics Question on Business cycles and economic models

Suppose the price elasticity of demand (eDe_D ) is − 1/5 and the price elasticity of supply (ese_s ) is 2/5 . Then, the incidence of a specific (or unit) tax on the firms is equal to

A

1/ 3

B

2/ 3

C

1/ 2

D

1/ 4

Answer

1/ 3

Explanation

Solution

The correct answer is (A) : 1/ 3