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vovangra
1 month ago
12

The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic. Both goods are considered to be normal goods

by a majority of consumers. Suppose that a large income tax increase decreases the demand for both goods by 10%. The change in equilibrium price will be:
a. increase in both the aged cheddar cheese and bread markets.
b. increase in the aged cheddar cheese market and a decrease in the bread market.
c. decrease in the aged cheddar cheese market and increase in the bread market.
d. a decrease in both the aged cheddar cheese and bread markets.
Business
1 answer:
arsen [2.9K]1 month ago
3 0

Answer:

D) a decrease in demand for both aged cheddar cheese and bread.

Explanation:

An increase of 10% in income tax will shift the aggregate demand curve to the left, leading to a reduction in overall demand. This will impact both necessary items and luxury items.

<pconsequently the="" demand="" curve="" for="" both="" aged="" cheddar="" cheese="" and="" bread="" will="" also="" shift="" leftward="" diminishing="" total="" quantity="" demanded="" across="" all="" price="" levels.="" this="" leads="" to="" a="" drop="" in="" equilibrium="" prices="" products.=""> </pconsequently>
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