Using the elasticity estimates in the table above, classify the price elasticity

Question

Using the elasticity estimates in the table above, classify the price elasticity demand as elastic or inelastic. Explain your reasoning. <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /?>

Explain the implications of those classifications on tax revenue collections when the per-unit tax increases as opposed to decreases.

Barnes & Noble books

-4.00

Coca-Cola

-1.22

Cigarettes

-0.25

Beer

-0.23

Gasoline

-0.06

Using the elasticity estimates in the table above, classify the price elasticity demand as elastic or inelastic. Explain your reasoning. <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /?>

Explain the implications of those classifications on tax revenue collections when the per-unit tax increases as opposed to decreases.

Barnes & Noble books

-4.00

Coca-Cola

-1.22

Cigarettes

-0.25

Beer

-0.23

Gasoline

-0.06

Explanation / Answer

1.Barnes & Noble books -4.00 = Elastic Coca-Cola -1.22 = Elastic Cigarettes -0.25 = Inelastic Beer -0.23 = Inelastic Gasoline -0.06 = Inelastic 2. Tax revenue collections will be in the following order: Gasoline > Beer > Cigarettes > Coca cola > Books The more the elasticity, the less the revenue collected.

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