Thus, the burden of this tax will be borne predominately by low-income residents, those least able to pay. Because in the long run producers have more options with regard to expanding production. They can build additional plants and equipment and thereby increase output more than is possible in the short run when they must work with existing facilities. Essay Questions 1. Suppose that Ford Motor Company reduced the price of its automobiles and sales increased.
Studies show that the demand for cigarettes is inelastic for adults but elastic for most teenagers.
In some cities, the demand for bus service is inelastic, in others it is elastic. Provide a possible explanation for this difference. Carefully explain why an increase in price will tend to increase total revenue if demand is inelastic.