Unformatted text preview: aph above the rebate is equivalent to the amount levied in tax because the original budget constraint and rebate constraint intersect one another and the vertical distance between this intersection and the tax constraint is identical (ii) Empirically it has been found that demand for petrol is inelastic and price changes do not alter consumption patterns (iii) The psychological effect of receiving a rebate from the government tends to entice consumers to purchase more of the good, regardless of its price elasticity of demand. (iv) Even if the good is highly inelastic with respect to price, consumers will still purchase less of it, as it is now relatively more expensive. (v) Combined tax and rebate policies lead the representative consumer (depicted in the graph above) to reduce their consumption of petrol and make them better off than a pure taxation policy would. Which of the following combinations are true? A.
E. (i), (iv) and (v) (ii), (iv) and (v) (i), (iii) and (v) (ii), (iii) and (iv) Abstain 7 10. For a price increase of good X, [Pen. 1]...
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- Spring '11
- Microeconomics, representative, E. Abstain