QUESTION: I have the solution to this problem and so I already know the answers.

Question

QUESTION: I have the solution to this problem and so I already know the answers. What I really want to know in particular is why we use .01 to calculate Public Safety Tax Revenue

.01 (10,000,000) = 100,000

WHERE does .01 come from??

I get all the other parts and equations, I'm just not seeing where this .01 comes from...

Because nonresidents benefit from local government public safety services, suppose that the federal government offers localities a public safety grant equal to $1 for $1 of local tax money spent on public safety.

A. Suppose that the city of Cool currently levies a property tax for public safety at a rate of one percent of taxable value on a base of $10 million of taxable property. If the price elasticity of demand for public safety in Cool is -0.2, calculate and explain the expected effect of the grant on public safety spending, local public safety taxes, and tax rates in Cool.

Explanation / Answer

When we say 1% it is 1/100 which equals to 0.01. This is how it is derived.

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